Private placements in the Equity market

A private placement of securities is an offer made by a company to a select group of investors such as financial institutions, banks and mutual funds. The advantage of private placement as a way to issue securities and raise funds comes from the following
Investors are better informed and there are less regulatory compliances in issuances to them
Issuing securities are less time consuming and cost-efficient since there are fewer procedures to be followed.
According to Companies Act of 2013, an offer to subscribe to securities is made to less than 50 persons is called private placement of securities. The requirements of SEBI's regulations with respect to a public issue will not apply to a private placement. A privately placed security can seek listing on a stock exchange provided it meets the listing requirements of SEBI and the stock exchange. A private placement of securities can be done by a company irrespective of whether it has made a public offer of shares or not.
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A private placement of shares or of securities that can be converted into shares at a future date, such as fully convertible and partly convertible debentures and warrants, made by a listed company is called a preferential allotment of securities.
Preferential allotment requires a resolution to be passed by the existing share-holders.
Pricing of the securities will be done according to the formula laid down by SEBI
The shares will be locked-in for a period of one year.
These regulations aim at ensuring that promoters and large investor groups do not take any action that may be detrimental to the interests of the public investors. 24 Carat Financial Services is a research hub that is a leading research hub known for providing prolific free commodity tips.