Answer the questions on the basis of following passage:-

Adhunik Ltd is a consumer goods manufacturing unit running the business for the last 11 years. The C.E.O Mr. Aman wants to raise capital with an objective to modernise the existing plant. For this he has made a plan to offer equity and preference shares in the primary market. He uses a combination of methods. He got the prospectus printed, so as to make a direct appeal to investors. Also he has invited offers from some brokers to buy shares at an enbloc value. Since Mr. Aman has a great circle of friends who are institutional investors, he can soon gather capital. Another method, that he wants to use is the online system of stock exchange.

"Mr Aman has a great circle of friends who are institutional investors."

Identify the method of floatation used in these lines

Private placement 

The correct answer is Option (1) - Private placement.

Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue. Access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use private placement. 

* Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.

* Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.

* E-IPOs: A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company. The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange. The issuer company can apply for listing of its securities on any exchange other than the exchange through which it has offered its securities. The lead manager coordinates all the activities amongst intermediaries connected with the issue.