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Types of Allotment

There are three methods of expanding the share capital by an existing company:

  1. By fresh issue of shares to the existing shareholders in proportion to the shares held by them (right shares or bonus shares).
  2. By making an offer, inviting the public in general to subscribe the share, which is generally known as initial public offer (IPO).
  3. By making a bulk allotment to an individual, company, venture capitalist or any other person through a fresh issue of shares. This process of bulk allotment is known as preferential allotment.

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