Description
Presentation on Preferential Allotment
Preferential Allotment
What is Preferential Allotment?
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Issue of equity or equity-related instruments by a listed company to pre-determined investors at a predetermined price Predetermined investors could be Promoters, Strategic investors, Venture Capitalists or Financial Institutions Not related to a public issue; is not same as the equity offered on a preferential basis for certain categories of investors in a public issue
Need for Preferential Allotment
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To secure of equity participation of large and important entities, who may otherwise find it costly or impractical to buy shares of the company Has been used in the past by the promoters as a means of raising their stake in the company Also abused by the promoters; by first selling their stake at a higher price in the secondary market and then building up their stakes through this route at a lower price
Regulations governing Preferential Allotment
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Shareholders need to pass a special regulation or a special approval from the Central Government under Section 81(A) of the Companies Act Minimum offer price is the 26-week average high-low closing price or two-week average high-low closing price, whichever is higher A Preferential Allotment of more than 15% entails an open offer to the existing shareholders under the SEBI takeover code Allotments to promoter group are subject to a lock-in period of one year; no lock-in period for other category of investors
Thank you
doc_218851948.ppt
Presentation on Preferential Allotment
Preferential Allotment
What is Preferential Allotment?
?
?
?
Issue of equity or equity-related instruments by a listed company to pre-determined investors at a predetermined price Predetermined investors could be Promoters, Strategic investors, Venture Capitalists or Financial Institutions Not related to a public issue; is not same as the equity offered on a preferential basis for certain categories of investors in a public issue
Need for Preferential Allotment
?
? ?
To secure of equity participation of large and important entities, who may otherwise find it costly or impractical to buy shares of the company Has been used in the past by the promoters as a means of raising their stake in the company Also abused by the promoters; by first selling their stake at a higher price in the secondary market and then building up their stakes through this route at a lower price
Regulations governing Preferential Allotment
?
?
?
?
Shareholders need to pass a special regulation or a special approval from the Central Government under Section 81(A) of the Companies Act Minimum offer price is the 26-week average high-low closing price or two-week average high-low closing price, whichever is higher A Preferential Allotment of more than 15% entails an open offer to the existing shareholders under the SEBI takeover code Allotments to promoter group are subject to a lock-in period of one year; no lock-in period for other category of investors
Thank you
doc_218851948.ppt