Question

Explain any four methods of flotation of new issue in the 'Primary Market'.

Answer 1

1. Public issue: Securities are issued to the all the members of the public who are eligible to participate in the issue.

2. Private placement: The sale of securities to a relatively small number of select investors as a way of raising capital. This is a wholesale issue of securities to institutional investors by an unlisted company.

3. Preferential issue: A private placement of securities by a listed company. Securities are issued to an identified set of investors which may include promoters, strategic investors, employees and such groups.

4. Qualified Institutional Placement (QIP): A private placement of securities by a listed company to a set of institutional investors termed as qualified institutional buyers is a QIP.