Although the Private Placement Market (PPM) in India offers convenience and flexibility to the issuers as well as to the investors, this method of raising funds in the primary capital market has not been able to succeed in maintaining its steady growth in India. This article assesses the Indian PPM and discusses among other aspects, the significance and growth prospects of the PPM in India.

Equity/Private Placement Market (PPM) financing is the direct sale by a company of its securities to a limited number of `sophisticated' investors. Equity/Preference shares, cumulative convertible preference shares and debentures are traded with a selected few investors mainly with the institutional investors. The PPM is governed by the guidelines of Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI).

It should be clearly understood that nowhere in `Companies Act' the phrase Private Placement (PP) is found. This phrase denotes the practice of offering shares privately or to a section of the public, either by the company itself or by the promoters or the directors of the company. In other words, broadly speaking, an issue of shares without offering them to the public may be said to be an issue made by PPM, the main feature being that no prospectus is issued for offering the shares to the public and there is no invitation made to the public for subscribing to the shares so offered. This mode of issuing shares is not prohibited under the companies act.

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