Question

Answer the question on the basis of following passage:
Adhunik Ltd is a consumer goods manufacturing unit running the business for the last 11 years. The C.E.O Mr. Aman wants to raise capital with an objective to modernise the existing plant. For this he has made a plan to offer equity and preference shares in the primary market. He uses a combination of methods. He got the prospectus printed, so as to make a direct appeal to investors. Also he has invited offers from some brokers to buy shares at an enbloc value. Since Mr. Aman has a great circle of friends who are institutional investors, he can soon gather capital. Another method that he wants to use is the online system of stock exchange.
In the above case Mr. Aman is using all methods of floatation which are used in the primary market because.

• A. It deals in new securities issued for the first time
• B. It is more transparent
• C. No permissions are required from SEBI
• D. Existing shares can be easily traded here

Hint:

The primary market is where new securities are issued for the first time, whereas the secondary market involves the trading of existing securities.

Answer 1

The Correct Option is A

The passage describes methods used in the primary market, where new securities are issued for the first time to investors. This process involves the issuance of new shares, making option (1) the correct choice.