Q. With reference to various types of issues in the Primary Market, consider the following statements:
1.In an Offer for Sale (OFS), the company directly offers its securities to the public without involving intermediaries.
2.A Bonus Issue involves issuing additional shares to existing shareholders out of the company’s distributable profits.
3.A Qualified Institutional Placement (QIP) allows listed companies to issue securities specifically to Qualified Institutional Buyers (QIBs) without going through standard public issue procedures.
Which of the statements given above is/are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 and 3 only

[C] 1 and 3 only

[D] 1, 2 and 3

Answer: B
Notes:

Explanation:

  • In an Offer for Sale (OFS), the securities are not directly offered to the public by the company. Instead, they are first sold to intermediaries like brokers or issuing houses, who then resell them to the public.
  • A Bonus Issue involves giving additional shares to existing shareholders by capitalizing the company’s distributable profits. No fresh capital is raised; it’s a reallocation of reserves.
  • A Qualified Institutional Placement (QIP) allows a listed company to issue securities only to Qualified Institutional Buyers (QIBs) without the need for elaborate regulatory procedures of a public issue.

Source- 11th NCERT: Economics: Indian Economic Development and TMH Indian Economy by Ramesh Singh

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