When securities are allotted by a company to Institutional Investors and some selected individuals, it is called __________.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Private placement
Option (1) Offer for sale — Incorrect. In an offer for sale, the company sells its securities in one lot at an agreed price to brokers or issuing houses. They then resell them to the investing public.
Option (2) e-IPO — Incorrect. An e-IPO is an issue offered to the public through the online system of a stock exchange.
Option (3) Private placement — Correct. In a private placement the company allots its securities to institutional investors and some selected individuals, not to the general public. It raises capital faster and at a lower cost than a public issue.
Option (4) Rights Issue — Incorrect. A rights issue offers new shares only to the existing shareholders, in proportion to the shares they already hold.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. Financial Markets left the new NCERT, but it kept its seat in the CUET exam hall. A quick read of those few pages of the pre-rationalised book is enough to score here. NCERT (Pre-rationalised Edition):
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