1. Public Issues:Under this method, the company issues a prospectus and invites the general public to purchase shares or debentures.When a company raises funds by selling (issuing) its shares (or debenture / bonds) to the public through issue of offer document (prospectus), it is called a public issue.

a. IPO (Initial Public Offer): Definition:The first important feature of the primary market is that it is related with the new issues. Whenever a company issues new shares or debentures, it is known as Initial Public Offer (IPO).When a (unlisted) company makes a public issue for the first time and gets its shares listed on stock exchange, the public issue is called as initial public offer (IPO).The first sale of stock by a private company to the public . IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.Also referred to as a" public offering."

Explanation:An initial public offering (IPO) marks the start of a company's publicly traded life. Find out why companies undergo IPOs, and how the process works.IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.Embark onthe interestingjourney from the pre-IPO stage to the final IPO placement in the primary market - Readthe Road to Creating an IPOand Interpreting a Company's IPO Prospectus Report. Mechanism/Procedure:An Issuer has to take various steps prior to making an application for listing its securities on the NSE. These steps are essential to ensure the compliance of certain requirements by the Issuer before listing its securities on the NSE. The Issuer shall file the draft prospectus and application forms with NSE. The draft prospectus should have been prepared in accordance with the statutes, notifications, circulars, guidelines, etc. Governing preparation and issue of prospectus prevailing at the relevant time. The Issuers may particularly bear in mind the provisions of Companies Act, Securities Contracts (Regulation) Act, the SEBI Act and the relevant subordinate legislations thereto. NSE will peruse the draft prospectus only from the point of view of checking whether the draft prospectus is in accordance with the listing requirements, and therefore any approval given by NSE in respect of the draft prospectus should not be construed as approval under any laws, rules, notifications, circulars, guidelines etc. The Issuer should also submit the SEBI acknowledgment card or letter indicating observations on draft prospectus or letter of offer by SEBI. Advantage Of IPO:More Capital:A company can raise huge amount of funds to finance its capex programs like expansion, modernization, diversification, etc. as well as working capital requirements.Zero Cost of Capital:Company is not required to pay interest on capital raised from the public. There is no need of repayment of capital as well except on winding up of company where it has to pay the residual amount after it pays all other creditors like bank loans, debentures, preferential shares etc.Easy to raise new capital:It is difficult for private companies to raise capital. By going public, raising capital becomes comparatively easier task.Pricing and Valuations:Commands better pricing than placement with private investors. Enables correct valuation for the company because share price is a true reflection of the financial soundness of a company and it would aid in case company wants to opt for mergers and acquisitions.Owner Diversification:Most of the funds of the founders are blocked in the firm till the firm grows and becomes more valuable. By means of IPO, they can sell some stake to diversify their holdings and can reduce the risk of their personal portfolios.Brand Image:It increases the visibility and reputation of the company and thereby enhances the brand image of the company.Increased Liquidity:The shares when get listed on the stock exchange, can be easily traded, providing more liquidity.Employee Prestige and Retention:Employee pride and confidence in the company may increase. Company can attract as well as retain employees by offering them equity incentives like stock options/stock purchase plans.

Disadvantage Of IPO:Dilution of control:Dilution of ownership stake makes company vulnerable for future takeovers.Time consuming and expensive:Takes substantial amount of management time and efforts . It involves very high expenses like that of underwriter, lead manager, investment banker, etc.Regulations:Increased regulatory monitoring to ensure that firm is making filings along with relevant disclosures.Accountability:It is accountable to investors and cost of maintaining investor relations are high.Disclosures:The Company is subject to disclosure of information from time to time and maintaining secrecy over expansion plans/market strategies becomes difficult.

Practical Example Of IPO:

b. E- IPO: Definition:Under this method, companies issue their securities through the electronic medium (i.e. internet). The company issuing securities through this medium enters into a contract with a Stock Exchange.SEBI registered broker have to be appointed for the objective of accepting applications. This broker regularly sends information about it to the company.The company issuing security also appoints a Registrar, who helps in making the issue a success by establishing contact with the stock exchange. (Whatever method, out of the above five is adopted, it is the activity of the primary market.) Explanation:IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.Embark onthe interestingjourney from the pre-IPO stage to the final IPO placement in the primary market - Readthe Road to Creating an IPOand Interpreting a Company's IPO Prospectus Report. Mechanism/Procedure:The Government of India has decided that Indian citizens living abroad can purchase Indian Postal Order electronically by paying online fee through e-Post Office Portal for seeking information under RTI from Indian Missions abroad. The procedures for purchase of IPOs electronically are as follows:The User needs to get himself registered at either of the two He has to select the Ministry/Department/Indian Mission from whom he desires to seek the information under the RTI Act and the e-IPO so generated can be used to seek information from that Ministry/Department/Indian Mission only. A printout of the e-IPO is required to be attached with the RTI application. If the RTI application is being filed electronically, e-IPO is required to be attached as an attachment.It may be noted that this facility is only for purchasing an Indian Postal Order electronically. All the requirements for filing an RTI application as well as other provisions regarding eligibility, time limit, exemptions, etc., as provided in the RTI Act, 2005 will continue to apply. Advantage Of E-IPO:New Capital:Almost all companies go public primarily because they need money. All other reasons are of secondary importance. The typical (firm-commitment)E- IPOraises $20-40M, but offerings of $100M are not unusual either. This can vary widely by industry. .Future Capital:Once public, firms can easily go back to the public markets to raise more cash. Typically, about a third of all E-IPOissuers return to the public market within 5 years to issue a "seasoned equity offering" (the termsecondaryis used to denote shares sold by insiders rather than by firms). Those that do return raise about three times as much capital in their seasoned equity offerings as they raised in theirIPO.Cashing Out:Although it is a bad signal to investors when an entrepreneur sells his own shares (indicating that [s]he is jumping ship), it still makes sense for many entrepreneurs to cash out some of their wealth to diversify or just to enjoy life.Mergers and Acquisition:Many private firms just do not appear on the "radar screen" of potential acquirers. Being public makes it easier for other companies to notice and evaluate the firm for potential synergies. Disadvantage Of E- IPO:Profit-sharing:If the firm is sitting on a gold-mine, future gold has to be shared with outsiders. But if the price is right, this is worth it. After the typical IPO, about 40% of the company remains with insiders, but this can varies from 1% to 88%, with 20% to 60% being comfortably normal.Loss of Confidentiality:A major reason why firms may not receive the right price is that firms are unable to convince investors that there is a gold in the mine. For example, it could destroy the business if the company were to disclose its technology of profitability to its competitors.Reporting and Fiduciary Responsibilities:Public companies must continuously file reports with the SEC and the exchange they list on. They must comply with certain state securities laws ("blue sky"), NASD and exchange guidelines. It costs money and discloses information to competitors. Practical Example Of E-IPO:c.FPO (Follow-On Public Offer): Definition:When a listed company makes another public issue to raise capital, it is called follow-on offer (FPO).An issuing of shares to investors by a public company that is already listed on an exchange . An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process.A Further public offering (FPO) is 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. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations. Explanation:FPOs are popular methods for companies to raise additional equity capital in the capital markets through a stock issue. Public companies can also take advantage of an FPO issuing an offer for sale to investors, which is made through an offer document. FPOs should not be confused with IPOs, as IPOs are the initial public offering of equity to the public while FPOs are supplemantary issues made after a company has been established on an exchange. Mechanism/Procedure:

SEBI in the past has observed certain concerns in offer documents filed by existing listed companies seeking to raise money from public. Further in this regard, the following is observed: Often existing listed companies are being investigated by SEBI for which show cause notice is yet to be issued by SEBI Such issuers may not be aware of such proceedings. Based on the details of such investigation, SEBI often asks for additional disclosures in the offer document in case of subsequent issues of the said issuer. If the requirement of public float is diluted further without any additional requirements to ensure investor protection, such issuers may access the capital market without any SEBI intervention and/or adequate disclosureI. Right Issue: Definition:This method is used by those companies who have already issued their shares. When an existing company issues new shares, first of all it invites its existing shareholders. This issue is called the right issue. In this case, the shareholder has the right either to accept the offer for himself or assign a part or all of his right in favour of another person.When a company raises funds from its existing shareholders by selling (issuing) them new shares / debentures, it is called asrights issue. The offer document for a rights issue is called as theLetter of Offerand the issue is kept open for 30-60 days. Existing shareholders are entitled to apply for new shares in proportion to the number of shares already held. Explanation:A company whose stock is trading at $20 may announce a rights offering whereby its shareholders will be granted one right for each share held by them, with four rights required to buy each new share at a subscription price of $19. The company will also specify that the rights expire on a certain date, which is usually anywhere from one to three months from the date of announcement of the rights offering.

Companies typically issue rights to give their existing shareholders the opportunity to buy additional shares before other buyers, and also to enable current shareholders to maintain their proportionate stake in the company. Mechanism/Procedure:Authorised share capital. Check that there is sufficient authorised share capital in the memorandum of association to accommodate the increase in the subscribed share capital that will arise due to the proposed rights issue. If the authorised share capital is inadequate, the memorandum of association must be amended to increase it by a suitable amount. If the articles also contain the authorised share capital, the articles also will have to be amended. Draft a Letter of Offer. As per section 81(1)(b), a 'notice' should make the offer of rights shares. This notice is called 'Letter of Offer'. (Give atleast 15 days time to shareholders for exercising their option) It is a document sent to the shareholders of a company offering them shares in a rights issue. No form has been prescribed of the Letter of Offer. Advantage Of Right Issue:This type of issue gives existing shareholders securities called "rights", which give the shareholders the right to purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stock at a discount price.Until the date at which the new shares can be purchased, shareholders may trade the rights on the market the same way they would trade ordinary shares. The rights issued to a shareholder have a value.Troubled companies typically use rights issues to pay down debt, especially when they are unable to borrow more money.Not all companies that pursue rights offerings are shaky. Some with clean balance sheets use them to fund acquisitions and growth strategies. For reassurance that it will raise the finances, a company will usually, but not always, have its rights issue underwritten by an investment bank. Disadvantage Of Right Issue:The value of each share will be diluted as a result of the increased number of shares issued.It is awfully easy for investors to get tempted by the prospect of buying discounted shares with a rights issue. But it is not always a certainty that you are getting a bargain. But besides knowing the ex-rights share price, you need to know the purpose of the additional funding before accepting or rejecting a rights issue.A rights issue can offer a quick fix for a troubled balance sheet, but that doesn't necessarily mean management will address the underlying problems that weakened the balance sheet in the first place. Practical Example Of Right Issue: An investor:Mr. A had 100 shares of company X at a total investment of $40,000, assuming that he purchased the shares at $400 per share and that the stock price did not change between the purchase date and the date at which the rights were issued.Assuming a 1:1 subscription rights issue at an offer price of $200, Mr. A will be notified by a broker dealer that he has the option to subscribe for an additional 100 shares of common stock of the company at the offer price. Now, if he exercises his option, he would have to pay an additional $20,000 in order to acquire the shares, thus effectively bringing his average cost of acquisition for the 200 shares to $300 per share ((40,000+20,000)/200=300). Although the price on the stock markets should reflect a new price of $300 (see below), the investor is actually not making any profit nor any loss. In many cases, the stock purchase right (which acts as adoption) can be traded at an exchange. In this example, the price of the right would adjust itself to $100 (ideally).The company:Company X has 100 million outstanding shares. The share price currently quoted on the stock exchanges is $400 thus the market capitalization of the stock would be $40 billion (outstanding shares times share price).If all the shareholders of the company choose to exercise their stock option, the company's outstanding shares would increase by 100 million. The market capitalization of the stock would increase to $60 billion (previous market capitalization + cash received from owners of rights converting their rights to shares), implying a share price of $300 ($60 billion / 200 million shares). If the company were to do nothing with the raised money, itsearnings per share(EPS) would be reduced by half. However, if the equity raised by the company is reinvested (e.g. to acquire another company), the EPS may be impacted depending upon the outcome of the reinvestment.ii. Preferential Issue: Delimitation :Preferential Allotment is the process by which allotment of securities/shares is done on a preferential basis to a select group of investors.A preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in Chapter pertaining to preferential allotment in SEBI (DIP) guidelines which inter-alia include pricing, disclosures in notice etc. Explanation:For the purpose of sub-regulation the term valuer has the same meaning as is assigned to it under clause (r) of sub-regulation of regulation of the Securities and Exchange Board of India (Issue of Sweat Equity) Regulations, 2002.For the purpose of this regulation, stock exchange means any of the recognized stock exchanges in which the equity shares are listed and in which the highest trading volume in respect of the equity shares of the issuer has been recorded during the preceding six months prior to the relevant date. Mechanism/Procedure:Hold a Board meeting. In that meeting, fix the date of General Meeting to pass a Special Resolution under Section 81(1A). File e-Form 23 with ROC within 30 days of General Meeting Resolution.After passing Special Resolution in General Meeting, hold another Board Meeting for allotment of equity shares.File e-Form 2 within 30 days of Board Meeting allotment Resolution. Please note that, an unlisted public company has to follow 'Unlisted Public Companies (Preferential Allotment) Rules, 2003' while making the above allotment of shares and MCA is contemplating to introduce more stringent rules by name 'Unlisted Public Companies (PreferentialAllotment) Amendment Rules, 2011'. So, I advise you to complete the allotment as soon as possible. For your reference, I have attached,Unlisted Public Companies (Preferential Allotment) Rules, 2003 with this reply. Advantage Of Preferential Issue:There are several benefits of a preference share from the point of view of a company which are discussed below:No Legal Obligation for Dividend Payment:There is no compulsion of payment of preference dividend because nonpayment of dividend does not amount to bankruptcy. This dividend is not a fixed liability like the interest on the debt which has to be paid in all circumstances.Improves Borrowing Capacity:Preference shares become a part of net worth and therefore reduces debt to equity ratio. This is how the overall borrowing capacity of the company increases.No dilution in control:Issue of preference share does not lead to dilution in control of existing equity shareholders because the voting rights are not attached to issue of preference share capital. The preference shareholders invest their capital with fixed dividend percentage but they do not get control rights with them.No Charge on Assets:While taking a term loan security needs to be given to the financial institution in the form of primary security and collateral security. There are no such requirements and therefore the company gets the required money and the assets also remain free of any kind of charge on them. Disadvantage Of Preferential Issue:Costly Source of Finance:Preference shares are considered a very costly source of finance which is apparently seen when they are compared with debt as a source of finance. The interest on debt is a tax deductible expense whereas the dividend of preference shares is paid out of the divisible profits of the company i.e. profit after taxes and all other expenses. For example the dividend on preference share is 9% and interest rate on debt is 10% with prevailing tax rate of 50%.The effective cost of preference is same i.e. 9% but that of the debt is 5% {10% * (1-50%)}. The tax shield is the main element which makes all the difference. In no tax regime, the preference share would be comparable to debt but such a scenario is just an imagination.Skipping Dividend Disregard Market Image:Skipping of dividend payment may not harm the company legally but it would always create a dent on the image of the company. While applying for some kind of debt or any other kind of finance, the lender would have this as a major concern. Under such a situation, counting skipping of dividend as an advantage is just a fancy. Practically, a company cannot afford to take such a risk.Preference in Claims:Preference shareholders enjoy similar situation like that of an equity shareholders but still gets a preference in both payment of their fixed dividend and claim on assets at the time of liquidation. Practical Example Of Preferential Issue:If the last working or processing does not go beyond minimal operations, recourse has to be taken to the highest value of the materials used in the manufactureThe different parts of a suit, originating in two countries, are packed in Algeria. The trousers originating in Iceland have a value of 180 Euros; the jacket, originating in the Community, has a value of 100. The minimal operation, carried out in Algeria ("packing") costs 2. The ex-works price of the final product is 330.To decide the origin, the value added in Algeria has to be compared with the customs values of the other materials used:Value added in Algeria (which includes 2 Euros for the operation) =330 (ex-works price)-280 ( trousers 180+jacket 100)=50, is the Algerian 'added value'.The Icelandic value (180) is greater than the value added in Algeria and the values of all other materials used. Therefore, the final product will have Icelandic origin.2. Offer For Sale: Definition:Under this method, firstly the new securities are offered to an intermediary (generally firms of stock brokers) at a fixed price. They further resell the same to the general public. The advantage of doing this is that the issuing company feels free from the tedious work of making a public issue.Institutional investors like venture funds, private equity funds etc., invest in unlisted company when it is very small or at an early stage. Subsequently, when the company becomes large, these investors sell their shares to the public, through issue of offer document and the companys shares are listed in stock exchange. This is called as offer for sale.The proceeds of this issue go the existing investors and not to the company. Explanation:Here is my attempt to let people understand the Offer for Sale process. Please leave your comments in case I miss something or you find any discrepancy in the post.Poor economic growth causes poor investment sentiment which results in poor market conditions and thus forces corporates to cost cutting. In another attempt to save some unnecessary costs and to reduce the time taken to raise money, SEBI has introduced a new process called Offer for Sale (OFS).Offer for Sale is getting really popular with the companies and as many as eight companies, like NMDC, Hindustan Copper, Eros International, Blue Dart, Honeywell Automation etc., have taken this route to either raise money from the markets or to increase non-promoter shareholding in order to comply with the minimum public shareholding guidelines. Mechanism/Procedure:Offer for Sale (OFS) is another form of share sale, very much similar to Follow-On Public Offer (FPO). OFS mechanism facilitates the promoters of an already listed company to sell or dilute their existing shareholdings through an exchange based bidding platform.Except the promoters of the company, all market participants like individuals, mutual funds, foreign institutional investors (FIIs), insurance companies, corporate, other qualified institutional bidders (QIBs), HUFs etc. can bid/participate in the OFS process or buy the shares. The promoters of the company can only participate as the sellers in the process. Advantage Of Offer For Sale:When running a business, you may explore many options to try to increase sales and the bottom line. One of the ways that many businesses try to increase sales is by offering discounts and credits to customers. While this can, in some cases, increase sales, it also can lead to problems for the company.Offering potential customers discounts on purchases is a way to quickly draw people into your store. Anytime you tell a customer that he can save money, youre likely to get his attention. Discounts dont only help your shoppers; they also help your business. From increased sales to improved reputation, discounts may be that one ingredient that can bring business success.Increase Traffic:One of the advantages of offering sales and credits is that it can increase traffic to your business. When you advertise that you are having a sale or offering a discount, it will sometimes bring customers in the door. Anytime you have an increase in traffic, it can turn out to be a positive thing if you are closing the extra opportunities for sales. The level of success that a promotion has can vary, but in many cases it will give you more opportunities to make sales.Increase Profit Margin:In some situations, you can actually increase the amount of profit margin that you bring in. For example, if you operate credit for timely payment, it will only affect some of your accounts. Customers might be willing to close the deal because of the potential for credit, but then few of them will get around to actually claiming it. This means that you will only have to pay out the credit on a small percentage of the sales you generate.

Attract Customers:Because people prefer buying things on sale, discounts serve as a ploy to attract more people to your store. If your discount is only good for a certain amount of days, mention that when you advertise the discounted items. People are more likely to rush in and look around if they know they only have a few days to do so. Your store will experience more traffic, so you may need to schedule more employees during the discount period so service is smooth.Increase SalesWith increased traffic typically comes increased sales -- and not only the discounted items. Because the discounts attract more people, you have more potential buyers for other items in your store, as most people will look around to see what you offer before making a purchase. For example, if your clothing store discounts your entire jeans selection, people will go to your store for the discount but also may buy other clothing items or accessories, such as jackets, shirts and belts. Disadvantage Of Offer For Sale:Qualifying and Financing the Buyer:Before entering into a contract with a buyer,preliminary work needs to be done. The most fundamental is to qualify the buyer for financing. A seller could end up spending a lot of money in legal fees, only to find the buyer cannot get financing. Worse still, the seller could find out on closing day the buyer cannot be funded. Now they are in a real pickle, as they have quite often bought another home and are relying on the proceeds of their sale to find the new purchase. Now both parties will really need a lawyer!First Refusals:A buyer places an offer subject to selling their home. This is a tricky situation, and a poorly written First Refusal contract can really disadvantage one party, or worse, lead to lawsuits. A properly written offer is only part of the battle. A seller must be very careful not to perform any action or make any decision that leaves them open to legal liability. This is where a professional real estate agent is so important. He/she will guide you through the process, ensuring you fully understand all your options, and their applicable consequences.Multiple Offers:Every seller would like to be in a multiple offer situation. A lawyer does not trade in real estate. You are required to market your home, and create the environment that will attract multiple offers. Keep in mind, the highest offer is not always the best offer.Buyers Beware! You are particularly vulnerable when dealing with a FSBO and their lawyer. There is no obligation on their part to be fair to you. A licensed Realtor is required, and has a duty, to be fair to all buyers when dealing with multiple offers. Property Appraisal:As a buyer, you need to know if a property is priced correctly. It is a terrible feeling to purchase your new home, only to find out that you paid far too much. You may also have trouble getting financing if the house has not been appraised properly.Many other buyers will steer away from your home while there is an offer in place, essentially leaving your home off the market.Fulfilling Conditions:If your offer was written properly, there are numerous clauses and timelines to protect your interest. These vary depending on the property. Most buyers will choose to have a home inspection, which very often results in issues that must be addressed. Resolving these issues can be time consuming, and emotional for both parties. Lawyers are not likely to deal with these problems without charging more fees. Clauses need to be rewritten. Timelines still need to be respected, and may possibly require adjustment. Practical Example Of Offer For Sale:

3. Private Placement: Definition:Under this method, the company sells securities to the institutional investors or brokers instead of selling them to the general public. They, in turn, sell these securities to the selected clients at a higher price. This method is preferred as it is a cheaper method of raising funds as compared to a public issue.The sale of securities to a relatively small number of selectinvestors for raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market.A private placement is an issue of shares or of convertible securities by a company to a select group of persons under Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. A private placement of shares 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 XIII of SEBI (DIP) Guidelines pertaining to preferential allotment in SEBI (DIP) guidelines which interalia include pricing, disclosures in notice etc, in addition to the requirements specified in the Companies Act. Explanation:Since a private placement is offered to a few, select individuals, the placement does not have to be registered with the Securities and Exchange Commission. In many cases, detailed financial information is not disclosed and a the need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor is only made aware of the placement after it has occurred. Mechanism/Procedure:An offer can be made under a Private Placement Offer Letter to not more than 200 people.Not just the limitation of allotment to 200 people but even an invitation to subscribe cannot be made to more than 200 people.The 200 people limit excludes Qualified Institutional Buyers and Employees and the limit of 200 people is calculated individually for each kind of security. Obviously, there cannot be a public announcement of such offers.The application form has to be numbered and addressed specifically to the person to whom the offer is made along with the Offer Letter. Allotments can be made only to such personsThe value of the Offer per person shall not be less than INR 20,000 of face value of securities. The payment for subscription should be through the bank account of the person subscribing to the securities and the company should keep a record of the bank account from where such payments have been received. No cash transaction is permitted. The money so received shall be kept in a separate bank account of the company and utilized only for allotment (or repayment).The price of the security has to be justified and the inference is that, it requires a valuation report by a Registered Valuer (can be a company secretary, chartered accountant or a cost accountant)Non-compliance can lead to a penalty of INR 2 cores or the amount involved in the offer, whichever is higher. Advantage Of Private Placement:Private placements provide several advantages over public offerings or venture capital for both large and small companies. Staying private allows your company to choose its own investors, unlike a public offering which is open to the general public. It saves your company the time and money required to make a public offering and maintain the financial records for the SEC. Because private investors often are more patient than public investors, with a private placement you can take more time to arrive at the agreed upon return. Finally, the options for type and amount of funding give you more flexibility and get you capital much faster than searching for venture capitalists, or waiting for your shares to sell on the public market. Disadvantage Of Private Placement:Private placement, especially when structured, can have disadvantages in both the long and short term. If only a few investors are interested, and dont want to invest a large amount of money it becomes difficult to raise the required amount of capital. Sometimes, private investors only buy in when the shares cost substantially less than the projected cost of the company, requiring you to sell more shares for the same amount of income. The reset feature of structured private placement allows private investors to gain additional shares, thereby reducing the number of shares you can sell to new investors, especially if you decide to go public in the future. Practical Example Of Private Placement:Companies utilizecapital marketsto raisemoneyfor projects by issuingstockIPOs,bondsand short-term moneymarketsecurities. Individual investors wish to earn interest or dividends on theirsavingscan meet companies looking to raisefundsby issuing securities.To illustrate how a corporatebondmoves through capital markets, suppose AB Co. needs to raise $1000. AB Co. offers a 10-yearbondon the bond market with apar valueof $1000. The bond is purchased by someone wishing to earn interest on the $1000 that they have available. AB Co. receives the $1000 incashand the investor receives a bond and the promise ofrepaymentplus interest. Should thebondholderlater decide he no longer wants the bond, he can sell it to another investor in the marketplace.To illustrate usingstocks, suppose AB Co. decided to raise more funds by issuing ten newsharesof stock for $100 per share. AB Co. offers these shares in the market and someone purchases all ten for $1000 total. This time, the investor obtains stock certificates giving him partial ownership of the company. AB Co. gets the $1000 in funds they wanted to raise. As in the example above, should this investor wish to no longer hold these stocks, he can sell them to another investor in the stock market for the currentmarket price. Should the company have extra cash, it could buy the stock back as well.

4.Qualified Institutional Placement: Definition:A Qualified Institutions Placement is a private placement of equity shares or securities convertible in to equity shares by a listed company to Qualified Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI (DIP) guidelines. The Chapter contains provisions relating to pricing, disclosures, currency of instruments etc.QIP or Qualified Institutional Placement is largely a fund raising tool for the listed companies.A designation of a securities issue given by the Securities and Exchange Board of India (SEBI) that allows an Indian-listed company to raise capital from its domestic markets without the need to submit any pre-issue filings to market regulators. The SEBI instituted the guidelines for this relatively new Indian financing avenue on May 8, 2006.Aqualified institutional placement (QIP)occurs when the Securities and Exchange Board of India (SEBI) allows an Indian company toissuesecurities in India without providing preliminary filings regarding the issue. Explanation:Prior to the innovation of the qualified institutional placement, there was concern from Indian market regulators and authorities that Indian companies were accessing international funding via issuing securities, such as American depository receipts (ADRs), in outside markets. This was seen as an undesirable export of the domestic equity market, so the QIP guidelines were introduced to encourage Indian companies to raise funds domestically instead of tapping overseas markets. Mechanism/Procedure:The SEBI with effect from 08th May, 2006 inserted chapter XIIIA guidelines (Disclosure and investor Protection) guidelines, 200 to provide guidelines for the Qualified Institutional Placement (THE QIP SCHEME) are as follows:The company who needs to raise the capital through the QIP are required to issue a minimum of 10% of the securities issued under the scheme to Mutual Fund.It is mandatory for the company to ensure that there are at least two allottees, if the size of the issue is up to Rs 250 crore and at least five allottees if the company is issuing securities above Rs 250 crore.Pursuant to the QIP Scheme, the Securities may be issued by the issuer at a price that shall not be lower than the higher of the average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange during the preceding six months; or the preceding two weeks.The aggregate of proposed placement under the QIP Scheme and all previous placements made in the same financial year by the company shall not be more than five times the net worth of the issuer as per the audited balance sheet of the previous financial year.The Securities allotted pursuant to the QIP Scheme shall not be sold by the allottees for a period of one year from the date of allotment, except on a recognized stock exchange.This provision allows the allottees an exit mechanism on the stock exchange without having to wait for a minimum period of one year, which would have been the lockin period if they had subscribed through a preferential allotment

Practical Example Of Qualified Institutional Placement:A retailer mightoffera men's watch for $2,000, meaning that the retailerwillsell the watch for that amount. However, a customer might come into the store and offer $1,500 for the watch, meaning that the customer is expressing an interest in buying the watch for that amount.Years are important because they create time frames for comparing information. For example, let's assume Company XYZ's fiscal year began on January 1 and that today is March 31. During this time, Company XYZ recorded the following:

By comparing the 2012revenueswith the 2011 revenues, we can calculate that Company XYZ was up 50% year over year.