Sometimes company sells its securities to a limited number of sophisticated investors.

Identify the method of floation of new issue discussed above.

Private placement

The correct answer is option (2) - Private placement.

Private placement: Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors. Entrepreneurs, herein, raise funds by selling the issues mainly to the institutional investors like:

i) Unit Trust of India

ii) Life Insurance Corporation of India

iii) General Insurance Corporation of India

iv) Army Group Insurance v) State Level Financial Corporations, etc.