Mechanics behind Preferential Allottments

Investing Strategies
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To the brothers & sisters of Valuepickr,

I am looking to understand the mechanics behind preferential allotments-i.e. what goes behind the scenes. And how would companies tend to approach and shortlist the allottees. And if we wish to be on the list of potential investors of the companies, how could that be accomplished?

As a example, I want to call out this company Shree Karni Fabcom, which I have been invested into since long, in fact, significantly (just-below 1% in the company). Little did I know the company is undertaking preferential issue before the below filing to the stock-exchange.

https://nsearchives.nseindia.com/corporate/SHREEKARNI_18012025182027_Intimation_SKFL_AS.pdf

As an example, Debashish Neogi, an investor, has been one of the allottees. If I also wish to be one of the allottees, what would it have taken beforehand? Please understand many of these investors are not even existing shareholders(as to call rights issue).

Specifically, in the case of preferentials:
1.) Who approaches whom first? Will the company approach potential investors or will the investors approach companies?

2.) Are there intermediaries involved like merchant-bankers, etc?

3.) As an outsider or even an insider(that is existing shareholder), how do I even know that so & so company is mulling a preferential issue, so that I could participate in it?

4.) What does it take to get (inbound?) calls to participate in potential preferentials?

I would deeply appreciate if anyone could lend some insight into this. I would like to open the floor for Q&A.
@ayushmit @Donald @rk1771 @sahil_vi @Malhar_Manek

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Most companies surge post the pref issue average of 80% .

Krystal integrated is recent example - entered with medium term . 50% allocation

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Maybe @DEBASHISH himself can help us understand the nuances of ehind preferential allotments.

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Interesting question. I will attempt sharing my thoughts based on my rather limited knowledge.

Who approaches whom first? Will the company approach potential investors or will the investors approach companies?

Could be both ways. When the company wants to bring on board marquee investors, they would be approaching such investors, most likely through intermediaries. On the other hand, I have also seen investors openly pitch their interest in participating in upcoming or proposed preferential issues, in investor concalls.

As an outsider or even an insider (that is existing shareholder), how do I even know that so & so company is mulling a preferential issue, so that I could participate in it?

I would say, through announcements of Board meetings to be held to approve such fund raises, is one way. Also, for such companies where you are specifically interested (and substantially invested) you may want to ask for one-on-one concalls to understand their future plans and indicate your interest in these calls.

Hope that helps. Please pardon if this seems too elementary!

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This is something, I think will be interesting to know for all value investors.

Maybe some senior, experienced investors might be able to add their information on these queries.

CC: @ayushmit @Donald

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@BuyRightSitTight
You said “I would say, through announcements of Board meetings to be held to approve such fund raises, is one way.”. But I think by the time the board meeting intimation for fund-raise is filed, investors would already have been finalized in the background. So this is a non-starter.

@ashwind
Yups; experienced investors can lend their insights for us.
CC: @Donald , @ayushmit

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In my understanding these allotments are relationship driven. Usually every company has a IR team or CFO driven team who scouts for the allotttes through their own networks for fund raise They talk to a number of them and out of which a few interested make final cut.

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“scouts for the allotttes”:
I would want to be one of the “scoutees”. What does it take?

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As said earlier this is pure relationship driven in Company CFO / CEO / IR head own network. This is based on my own experience.