In limited companies the capital is raised by issuing the shares. Capital is raised by the new companies as well as by existing companies by issue of shares in primary market. The shares are subscribed by public, mutual funds, foreign institutional investors and other financial institutions.
The capital issues can be classified as below:-
1. PUBLIC ISSUES
Public issue is further divided in two parts:-
- Initial Public Offering (IPO) :- When a unlisted company makes a fresh issue of securities or an offer for sale of its existing securities or both first time then it will be called as initial public offering.
- Further Public Offering (FPO) :- When an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document then it will be called as further public offering.
2. RIGHT ISSUES
When a listed company proposes to issue fresh securities to its existing shareholders on a record date on the basis of a particular ratio to the number of shares held by them prior to right issue, it will be a right issue.
3. PRIVATE PLACEMENT
Private placement is an issue of shares by a company to a select group of persons. This is neither a right issue nor a public issue. This is the faster way for a company to raise capital. Private Placement of securities is further classified in following parts:-
- Private Placement (For unlisted companies)
- Preferential Issues (For listed companies)
- Qualified Institutions Placement (For listed companies)
In India public issues are regulated by ‘Securities Exchange Board of India (SEBI).
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