The unlisted companies first time raise share capital by issuing IPO to the general public/ investors, however, issuing an IPO involves various strict rules and regulations and being, complicated procedures the mediocre or newly establish enterprises sometimes unable to raise funds through an initial public offering.
Therefore, such companies which don’t want to go into public or unable to fulfil the guidelines of SEBI (Securities and Exchange Board of India) can also raise funds through private placements or preferential allotment.