A Study on Private placement – A Key to Primary Market
INTERNATIONAL MULTIDISCIPLINARY E-JOURNAL 2015
9 Pages Posted: 19 Jul 2021
Date Written: April 1, 2015
Private placement of securities is an offer by a company, to a select group of persons to subscribe its securities. Private placement can be made to any person except for qualified institutional buyers and ESOP holders. Normally, a company would prefer approaching its existing shareholders over any other person. If they do not accept the offer or if the company is not able to raise the required amount of capital from existing shareholders, then it may consider approaching its key managerial personnel, kith and kin of the directors etc. Basically, the underlying element of the provision is that private placements cannot be made to persons who are not even remotely acquainted with the company. Further, there are fixed timelines for execution. Private placement has become comparatively more structured, time oriented and transparent. Apart from the 2013 Act, a listed issuer has to adhere with the SEBI (Disclosure of Investor Protection) Guidelines, 2003. This becomes even more crucial when foreign shareholders are involved and time has to be factored for potentially securing “internal” approvals at various levels for those investments by such foreign shareholders. Objective of the study is to study findings from sources of private placement for mobilisation of funds. In view of the objectives of the study, exploratory research design has been adopted. The study is based on secondary data covering annual data of the various sources of private placement method of issue from 2000-01 to 2013-14. This has been collected from official websites of Reserve Bank of India. Various other reports like magazines, journals, published books are also referred to for the present study. The statistical tools applied for data analysis is descriptive and inferential statistics. Based on objectives, the hypotheses are formed for analysis.
It is concluded that funds mobilised from private placement of public sector and its financial institution has been consistently rising with a CAGR of 15% during the study period since it is more structured, time oriented, transparent and cheaper source.
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