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Preferential allotment is the process by which a company raises money from a select group of investors by issuing new shares, often at a price lower than the market value. Over the past six months, more than 100 companies, including Vodafone Idea, IFCI, Adani Green, IDFC First Bank, Fineotex Chemicals, and Himadri Specialty, have raised capital through preferential allotments. Generally, preferential issuance of equity shares is seen as a positive signal to a company's growth prospects and this growing trend is what prompted me into investigating whether these allotments correlate with a surge in stock prices.
Ergo, I did 2 different data studies. The first used random companies (17 stocks) that had had a preferential allotment recently -- which showed a portfolio return of 137%. The second data study was specific to smallcaps and microcaps wherein I used data from Sovrenn's platform which showed a 98.3% annualized return. Essentially, preferential allotment information seems to presents a viable investment strategy with room for potential gains if coupled with due diligence and use established screening techniques to make informed decisions
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👉 Video Chapters:
00:00 Preferential Issuance of Equity Shares
01:57 What is Preferential Allotment?
02:51 How Companies Utilize the Fund Raise
05:59 SEBI Issue of Capital and Disclosure Requirements
07:25 Benefit of Preferential Issue to Retail Investors
08:52 Data Study 1 - 137% Return
10:35 How to Find Preferential Allotment Information
12:22 Data Study 2 - 98% Return
13:40 Shankar Nath's Viewpoint
#preferentialallotment #preferentialissue #stockmarketstrategy
Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links
