What is Preferential Allotment?

Preferential allotment is the process by which allotment of shares is done on a preferential basis to a select group of investors.Now let us understand about it in details. A company plans to raise funds for its future expansion activities and reducing debt. But issuing securities to the public at large can be very time-consuming and complicated process. So, the company may decide to issue a wholesale quantity of shares to a group of people or companies those are interested. This makes a lot of paper work easier as well as is a lucid way to raise some funds.