DIFFERENT KINDS OF ISSUES OF SHARES CAPITAL.

What are the different kinds of Issues?

Primarily issues can be classified as a Public, Rights or preferential issues (also known as private placements). When public and rights issues involve a detailed procedure, private placements or preferential issues are relatively simpler. The classification of issues is illustrated below;

 Public issues can be further classified into initial Public offerings and further public offering. In a public offering, the issuer makes an offer for new investors to enter its shareholding family. The issuer company makes detailed disclosures as per the DIP guidelines in its offer document and offers it for subscription. The significant features are illustrated below:

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for the listing and trading of the issuer’s securities.

A Further Public Offering (FPO) is when already listed company makes either afresh issue of securities to the public or an offer for sale to the public, though an offer document. An offer for sale is such scenario is allowed only if it is made to satisfy listing or continuous listing obligations.

Rights Issue (RI) is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for the companies who would like to raise capital without diluting stake of its existing shareholder unless they do not intend to subscribe to their entitlements.

A private placement is an issue of shares or of convertible securities by a company to a selected group of persons under section 81 of the companies Act,1956, which is neither a right issue nor a public issue. This is a faster way for a company to raise equity capital.

A private placement of share or of convertible securities by a listed company is generally known by name of preferential allotment. A listed company going for preferential allotment has to comply with the requirements contained in Chapter Xlll of SEBI (DIP) Guidelines pertaining to preferential allotment in SEBI (DIP)guidelines which inter-alia include pricing disclosures in notice etc, in addition to the requirements specified in the Companies Act.               

  A Qualified Institutions Placement is a private placement of equity shares or securities convertible in to equity shares by listed company to qualified institutions Buyers only in terms of provision of chapter Xlll A of SEBI (DIP) guidelines. The Chapter contains provision relating to pricing, disclosures, currency of instruments etc.