{"id":14302,"date":"2026-05-27T07:40:59","date_gmt":"2026-05-27T07:40:59","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/preferential-allotment\/"},"modified":"2026-05-27T07:40:59","modified_gmt":"2026-05-27T07:40:59","slug":"preferential-allotment","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/preferential-allotment\/","title":{"rendered":"Preferential Allotment"},"content":{"rendered":"

Preferential allotment<\/a> is the issuance of shares<\/a>, convertible debentures<\/a>, or other securities by a listed or unlisted company to a select group of investors at a preferential price, without going through a public offering. It is governed by SEBI regulations<\/a> for listed companies and the Companies Act, 2013.<\/p>\n

What Is Preferential Allotment?<\/h2>\n

When a company wants to raise capital from specific investors (promoters, strategic partners, private equity<\/a> funds, or institutional investor<\/a>s) without opening the issue to the public, it does so through preferential allotment. It is a private deal between the company and the chosen allottees.<\/p>\n

SEBI<\/a> Rules for Listed Companies<\/h2>\n

For listed companies, preferential allotments must follow SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018:<\/p>\n

– **Shareholder approval**: special resolution required (75% votes)
\n– **Minimum pricing**: allotment price cannot be below the higher of the average of the weekly high-low closing price for the preceding 26 weeks or 2 weeks (SEBI formula price)
\n– **Lock-in**: 6 months for non-promoter allottees; 18 months for promoters if it forms part of minimum promoter contribution
\n– **Fresh shares**: company can issue new shares or transfer existing shares<\/p>\n

Common Uses<\/h2>\n

– Bringing in a strategic investor
\n– Promoter increasing stake in the company
\n– Pre-IPO<\/a> placement to institutional investors
\n– Debt-to-equity conversi<\/a>on (issuing shares to lenders)<\/p>\n

Practical Example<\/h2>\n

A mid-sized listed pharma company needs Rs 500 crore to build a new manufacturing plant. It identifies a large private equity fund as a strategic partner. After shareholder approval, the company issues new shares to the fund at SEBI formula price of Rs 220 per share. The PE fund receives 2.27 crore shares and is subject to a 6-month lock-in.<\/p>\n

Key Takeaways<\/h2>\n

– Preferential allotment issues shares to specific investors at a set price without a public offering
\n– Listed companies need shareholder approval (special resolution) and must follow SEBI pricing formula
\n– Lock-in of 6 months for non-promoters and 18 months for promoter contribution
\n– Used for strategic investments, promoter stake increases, and PE fund entry
\n– Faster and more targeted than a rights issue<\/a> or FPO<\/p>\n","protected":false},"excerpt":{"rendered":"

Preferential allotment is the issuance of shares, convertible debentures, or other securities by a listed or unlisted company to a select group of investors at a preferential price, without going through a public offering. It is governed by SEBI regulations for listed companies and the Companies Act, 2013. What Is Preferential Allotment? When a company […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14302","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"Preferential allotment is the issuance of shares, convertible debentures, or other securities by a listed or unlisted company to a select group of investors at a preferential price, without going through a public offering. It is governed by SEBI regulations for listed companies and the Companies Act, 2013. What Is Preferential Allotment? When a company…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14302\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}