1. Definition and Legal Framework

• Private Placement refers to the issue of shares or securities by a Public Limited Company to a selected group of investors (not more than 200 in a financial year, excluding QIBs and ESOP allottees), rather than through a public offer.
  
• Governed by Section 42 of the Companies Act, 2013 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
  
• It enables companies to raise capital without undergoing the rigorous process of public listing.
  

2. Eligible Investors and Limits

• Private placement can be made to Qualified Institutional Buyers (QIBs), banks, mutual funds, venture capital firms, or other selected persons.
  
• A Public Limited Company cannot issue securities to more than 200 persons in a financial year per type of security.
  
• Offers made to employees under ESOP or through rights issues are excluded from this limit.
  
• Each offer must be accompanied by a private placement offer letter (Form PAS-4).
  

3. Procedure for Private Placement

• The company must obtain board and shareholder approval (special resolution) for each private placement.
  
• File Form MGT-14 with the Registrar of Companies (ROC) after passing the special resolution.
  
• Circulate the offer letter (PAS-4) only to identified persons approved by the board.
  
• Allotment must be completed within 60 days of receiving the application money.
  
• File Form PAS-3 (Return of Allotment) within 15 days of allotment.
  

4. Conditions and Restrictions

• Application money must be received by cheque, demand draft, or banking channels—no cash is allowed.
  
• Money must be credited to a separate bank account, and shares can be allotted only after full subscription.
  
• Non-compliance leads to penalties, and the offer may be considered a public offer, requiring SEBI compliance.
  
• The company cannot use advertisements, marketing, or media to publicize the offer.
  

5. Advantages and Strategic Use

• Quicker and cost-effective way of raising funds compared to public offerings.
  
• Allows control over investor selection, making it useful for strategic partnerships and financial structuring.
  
• Suitable for raising capital in stages, without diluting control widely.
  
• Often used by Public Limited Companies for pre-IPO rounds, debt issuance, or preferential allotments.