What is Preferential Equity allotment?

What is Preferential Equity Allotment?

Preferential Allotment is when a company sells shares at a lower price to a chosen group of investors and raises funds by issuing new shares to a specific group of people. In another way, these investors are current shareholders, strategic partners, preferred investors, or preferences. The QIP allows an Indian company to raise money from local markets without needing to show any documents to market authorities beforehand.

Finding multibagger stocks is important for building wealth. Discover potential multibaggers at Sovrenn Discovery 

Purpose of Preferential Equity Allotment

It is done by companies to secure:-

  • funding for growth
  • By forming strategic partnerships, company can have more confidence in raising money, and the process will be smoother and easier.

Lets explain you the preferential allotment procedure:

On June 11th, 2023, Balu Forge Industries Limited Board of Directors granted approval for the issuance of 1.4 crore preferential allotment of equity shares offering, to non-promoters. The issuance price was set at INR 115 per share, resulting in a total value of INR 158 crore.

The company’s rationale for the issuance included two main objectives:

  • To purchase and installation of new and existing plant and Machinery: INR 110 crore
  • For expansion plans and working capital requirement – INR 9 Crores
  • To serve general corporate purposes:- INR 39 crores

The preferential share allotment were issued at a discount of approximately 28% to 30%,

High Net Worth Individuals (HNIs) often invest in such offerings as they are usually aimed at fostering a new phase of growth for the company.

Investing has built huge wealth for several HNI investors. Learn investing FREE OF CHARGE at Sovrenn Education 

Preferential Allotment By Listed Company

Here’s the snapshot of the recent preferential allotment done by listed company?

Sl NOName of the Proposed AlloteePre-issue HoldingNo, of shares to be issuedPost Issue categoryTotal Amount (INR Cr)
1Ashish Kacholia0.00%21,65,5002.16%25
2Bengal Finance and Investment Private Ltd0.00%21,65,5002.16%25
3Sage one Flagship growth fund0.00%18,00,0001.80%20.7
4Vanja Sundar Iyer0.00%18,00,0001.80%20.7

Total Amounts raised = INR 158 Cr against the issue of 1,37,27,000 shares.

Do You Know How to Find Micro Cap Stocks With Huge Growth Potential ?