Thursday, January 19, 2017

Can an Unlisted Company Raise Capital?

Picture shows gold coins symbolising raising capital
Picture shows gold coins symbolising raising capital

Actual Question:

Can a public Ltd. company raise capital by issuing shares at the beginning without listing on any stock exchange?

Answer:

Dear Friend
Yes, raising capital by issue of shares and listing are two completely different things. I do not wish to get into technicalities, but certainly a public limited company can raise capital by issue shares without being listed on the stock exchange.
Listing on the stock exchanges simply lends liquidity to the shares - meaning investors will be able sell the shares at any time.
I read just now that the central government is proposing to list the following five public sector general insurance companies soon:
  • General Insurance Corporation of India
  • National Insurance Co. Ltd.
  • Oriental Insurance Co. Ltd.
  • New India Assurance Co. Ltd.
  • United India Insurance Co. Ltd.

All the above five are public limited companies having raised share capital but as on date unlisted.
In conclusion, yes unlisted companies can certainly raise capital by issuing shares.
Thank you,
With Best Regards
Anand

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