1. Public issue / going public: Public issue is the most popular method of raising capital these days by the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. An enterprise organizing itself as a public limited company can raise the required funds commonly by preparing a prospectus.
When an entrepreneur offers shares to the public for subscription, he/she is required to comply with all the restrictions and formalities pertaining to the initial issues, prospectus drafting and launch.
2. Rights issue: Rights issue is a method of raising additional finance from existing shareholders by offering securities to them on a pro-rata basis i.e. giving them a right to a certain number of shares in proportion to the shares they are holding. This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment.
3. Private placement: Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors.
Entrepreneurs, herein, raise funds by selling the issues mainly to the institutional investors like:
(i) Unit Trust of India
(ii) Life Insurance Corporation of India .
Entrepreneurs both from public limited and private limited sector, bank heavily upon raising funds through the issue of varied financial instruments under this segment as at times they do not wish to disclose information to the open market.
4. Offer to employees: Stock options or offering shares to the employees has gained much popularity in many countries of the world.
This method enables employees to become shareholders and share the profits of the company leading to:
(a) Higher efficiency
(b) Low labour turnover
(c) Low floatation cost
