PrivatePlacement:”Privateplacement” means any offer of securities or invitation to subscribesecurities to a select group of persons by a company (other than by way ofpublic offer) through issue of a private placement offer letter and which satisfiesthe conditions specified.1PrivatePlacement helps to raise the capital more quickly than a public issue. Generallydue to mandatory and non-mandatory expenses, the primary market can beexpensive. This is the reason why some companies cannot afford a public issueand choose to use private placement. Investorsinvolved in private placements can include large banks, mutual funds, insurancecompanies and pension funds. It is a different from a public issue.

In privateplacement the securities are made available for sale on the open market to anytype of investor. Acompany making an offer or invitation under this section shall allot itssecurities within sixty days from the date of receipt of the application moneyfor such securities and if the company is not able to allot the securitieswithin that period, it shall repay the application money to the subscriberswithin fifteen days from the date of completion of sixty days and if thecompany fails to repay the application money within the aforesaid period, itshall be liable to repay that money with interest at the rate of twelve percent. per annum from the expiry of the sixtieth day.2There are number ofbenefit in capital raising through Private placement. It has minimal regulatoryrequirements and standards that it must abide by.

Private Placement is a methodof capital raising that does not have to be registered with the Securities andExchange Commission (SEC) which made it easy as comparative to other forms offund raising. Generally Private Placement investors consists of a small pool ofentities and individuals. Also, the investment does not require a prospectusand in many cases, detailed financial information is not disclosed.3  1Section 42 (2) of the CompaniesAct, 20132Section 42 (6) of the CompaniesAct, 20133Yogesh Malhan, Mondaq, PrivatePlacement under Companies Act, 2013, 9 April 2017.

 Financial Institution:In recent years, thegovernment has set up a number of special financial institutions in the countryto provide long term finance to business enterprises because the role ofcommercial banks in the field of long term finance to industry has beennegligible. The IFCI, IDBI, ICICI, SFCs are the main among such financial institutions.Now, these institutions have become major source of finance. They providefinance both in form of equity and debt. These institutions provide both directand indirect loans. These days these institutions are not simply financialinstitutions rather they also provide with promotional, technical andmanagerial services.

 The possibilities of getting finance in theseinstitutions are generally high, especially for new companies who find itdifficulty in to raise finance from the public. Also the rate of interest andpayment procedures are convenient and economical in these institutions. Theprocedures of repayment of loans are made in easy instalments to deservingconcerns. Some institutions also provide with expert advice and guidance forthe successful planning and administration of projects.  AmericaDepository Receipts (ADR):Whena company wants to raise its fund oversea like from America and an investorfrom America wants to invest in India then they have to take help of ADRs. InIndia many companies like HDFC bank, Infosys, Videocon D2H have raised therefund through ADRs. All the paper works related to ADR in a company is performedby Domestic Custodian which has a counter part or collaboration with a companyin USA. TheCompanies Act, 2013 talks about Global Depository, according to which, Acompany may, after passing a special resolution in its general meeting, issuedepository receipts in any foreign country in such manner, and subject to suchconditions, as may be prescribed.

4Thedepository receipts issued by a company in the USA are known as the AmericaDepository Receipts. ADRs are bought and sold in American markets like regularstocks. ADR is similar to a GDR except that it can be issued only to Americancitizens and can be listed and traded on a stock exchange of USA. Thesereceipts are any negotiable securities that represent securities of companiesthat are foreign to the market on which the DR trades.5


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