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CMA Intermediate · Financial Management and Business Data Analytics · Capital Market

In the Indian primary market, which method of raising capital involves a company offering its securities to a select group of qualified institutional buyers or a limited number of identified investors, rather than to the general public?

Private placement is the method in which a company offers securities to a select group of institutions or identified investors instead of the general public. It differs from an IPO, which is public, and from a rights issue, which is addressed only to existing shareholders.

  1. AInitial public offer through book building
  2. BPrivate placementCorrect
  3. CRights issue to existing shareholders
  4. DOffer for sale by existing promoters

Explanation

Private placement means offering securities to a select group of identified persons or institutions and not to the public at large. An IPO is made to the public, a rights issue is limited to existing shareholders, and an offer for sale involves existing holders selling their shares.

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