Facts for Prelims (FFP)
Source: IE
Context: Sebi has decided to repeal certain circulars related to the private placement of securities, which provided relaxation for allotment.
What is Private Placement of Securities?
Private Placement of Securities refers to the process of selling stocks, bonds, or other securities directly to a select group of investors, rather than making them available to the general public. This method is often used by companies to raise capital without having to go through the extensive regulatory requirements associated with a public offering.
Private placement includes preferential allotment and qualified institutional placement (QIP):
- Preferential allotment involves issuing new shares to existing shareholders or a specific group at a price below market rate, often to reward or retain them. It’s regulated by SEBI and the Companies Act, requiring shareholder approval.
- Qualified Institutional Placement (QIP) is for listed companies, allowing them to issue shares to institutional buyers like mutual funds and banks without a public offering. It’s used to raise capital swiftly for expansion or other corporate needs, following SEBI guidelines.
