Question

Faber Ltd. invited applications for 70,000 equity shares of ₹ 100 each. The application money received @ ₹ 30 per share was ₹ 27,00,000. Name the kind of subscription. List the three alternatives for allotting these shares.

Answer 1

Application money received:

₹ 27,00,000 ÷ ₹ 30 = 90,000 shares

Shares offered = 70,000 shares

Since applications were received for 90,000 shares, the issue is oversubscribed.

Three alternatives for allotment:

1. Reject excess applications and allot 70,000 shares in full to selected applicants.
2. Make pro rata allotment to all applicants.
3. Use a combination method: reject some applications, allot some in full, and make pro rata allotment to the remaining applicants.