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There are two types of private placement that are followed:
1. Preferential Allotment
2. Qualified institutional placement
Preferential Allotment: Preferential allotment is the practice of issuing of securities to a selected group of entities such as mutual fund companies, financial institutions or promoters at a particular price.
The directives for such an allotment is specified in the Chapter XIII of SEBI (DIP) guidelines. The investors may also have a lock-in period for the issue of securities and the company needs to take.
Qualified Institutional Placement: In this mode of private placement, a listed company is able to issue shares or other securities to only institutional buyers. It is a way of encouraging the listed companies to raise capital from the domestic market. The rule governing such placements is specified in Chapter XIIIA of SEBI (DIP) guidelines.