Fundamental Glossary / Shareholding & Ownership
Preferential Allotment
A private issue of shares or convertibles to a selected group, not offered to every shareholder.
Formula
Issued under the Companies Act and SEBI preferential-issue norms, at a price not below the regulated floor, with a lock-in.
What it means
Preferential allotment brings in a chosen investor, a lender converting debt, or a promoter putting in money. Everyone else is diluted if they are not in the group.
The floor price formula exists so the issue is not an obvious giveaway relative to recent market prices. It is not a fairness opinion on the business.
How to read it
Ask who is being issued shares, at what price relative to your value, and what the company will do with the money. A promoter putting cash in at a fair price is different from a connected party receiving shares cheap.
What to watch
Lock-in delays the new shares hitting the market. It does not stop the dilution of ownership, which happens at allotment.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.