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Question : 2
Total: 18
Gujarat Textiles Ltd., needs to raise funds of Rs 80 crore. It cannot afford the cost of public issue, so it was decided to allot its equity shares to institutional investors like LIC and some selected investors. Identify and explain the method of floating new issues used by 'Gujarat Textiles Ltd.
Solution:
Gujarat Textiles Ltd., uses private placement as it is considerably less expensive and less time consuming unlike public issue. Accordingly, the private placement process involves issuance of securities to the selected institutional investors and other individual investors. This process is useful for small businesses like Gujarat Textiles Ltd., involved in risky ventures.
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