The following points highlight the four kinds of capital issues. The kinds are: 1. Initial Public Offering (IPO) 2. Follow on Public Offering (FPO) 3. Rights Issue (RI) 4. Preferential Issue.
Kind # 1. Initial Public Offering (IPO):
When an unlisted company, for the first time makes a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public and it requires to enlist the securities in a recognized stock exchange, such issues are called ‘Initial Public Offerings’.
Kind # 2. Follow on Public Offering (FPO):
When an existing listed company either makes a fresh issue of securities to the public or makes an offer for sale of securities to the public for the first time, through an offer document, such issues are called as ‘Follow on Public Offering’. Such public issue of securities or offer for sale to public is required to satisfy the stock exchange listing obligations along with SEBI guidelines.
Kind # 3. Rights Issue (RI):
When a listed company proposes to issue securities to its existing shareholders, whose names appear in the register of members on record date, in the proportion to their existing holding, through an offer document, such issues are called ‘Rights Issue’. This mode of raising capital is best suited when the dilution of controlling interest is not intended.
Kind # 4. Preferential Issue:
ADVERTISEMENTS:
A preferential issue is an issue of equity shares or of convertible securities by listed companies to a select group of persons which is neither a rights issue nor a public issue. The issuer company has to comply with the provisions of the Companies Act, as well as, SEBI’s DIP guidelines with reference to preferential issues.
A company which makes any public or rights issue or an offer for sale can issue shares only dematerialized form. A company shall not make a public or rights issue of shares unless all the existing partly paid shares have been fully paid-up or forfeited. A company which is making public issue of securities shall make an application to the stock exchange for listing of those shares.