All the listed companies in India are public limited companies. By Public limited we mean companies which can offer their shares to general public at large. Anybody can invest in company, hence it improves capital base of the company.
How Public limited companies operate ?
Generally when business of Private limited company grows, there are 3 options available to Private limited company
- Take Loan from Banks : But most of the growing business already have loans and banks tend to offer little or no credit after certain amount.
- Take money from angel investors: Before taking money from angel investors, there are lots and lots of due diligence conducted by angel investors and secondly they take a major chunk of their shares and interfere in operations as well.
- Convert Private limited into public limited and raise funds from general public through IPO: This method although dilutes some of the share holding but have following benefits :
- No interest to be given to shareholder
- No interference of shareholder as there are lakhs of people holding very small number of shares.