Modes of allotment of shares other than Public Offers
10 questions. Each answer is explained.
Question 1 of 10Practice · Series II-A — Registrars to an Issue and Share Transfer Agents - Corporate
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Learn these topics
More units in NISM Series II-A
- Introduction to Securities10
- Characteristics of Equity Shares10
- Characteristics of Debt Securities10
- Characteristics of Other Securities10
- Basics of Mutual Funds10
- SEBI – Role and Regulations10
- Public Offer of Securities10
- Processes related to Public Offering of Shares10
- Roles and Responsibilities in a Public Issue10
- Depository Services10
- Processes Related to Depositories10
- Investor Interface with the R&T Agent10
- Secondary Market Transactions10
- Client Servicing10
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 2 of 100 marks (2%) |
Source: March 2025 Annexure I, Unit 8: Modes of allotment of shares other than Public Offers
NISM Series II-A Registrars to an Issue and Share Transfer Agents - Corporate
Exam rules read on NISM's site on 31 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 31 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 10 questions on Modes of allotment of shares other than Public Offers, with answers
Q1Which description best identifies a private placement of shares rather than a public offer?
Option A. An unrestricted invitation to every member of the public to subscribe
Why it is wrong: An unrestricted public invitation is inconsistent with the private-placement distinction.
Option B. A routine sale of existing shares between investors on the stock exchange
Why it is wrong: A routine exchange trade is a secondary-market transaction.
Option C. An offer to identified eligible persons under the private-placement process — Correct answer
Option D. A bonus allotment made to all eligible existing shareholders of the company
Why it is wrong: A bonus allotment is a corporate action, not a private placement for subscription.
Answer: C. A private placement is an offer to identified eligible persons through the prescribed private-placement process, not an unrestricted public invitation. Remember: Private placement depends on a restricted offer process, not simply a small issue size.
Hint, shown before you answer in practice mode: Focus on how recipients are selected and the process used for the offer. Common mistake: Assuming any small share issue is automatically a private placement.
II-A-071easyconceptual
Q2Which investor group is the intended eligible group for a qualified institutions placement, called a QIP?
Option A. Only the issuer’s own employees
Why it is wrong: An employee-only offer belongs to a different type of arrangement.
Option B. Every individual retail applicant
Why it is wrong: Retail applicants do not become eligible merely because the issue is called a placement.
Option C. Only the issuer’s suppliers
Why it is wrong: Being a supplier does not by itself establish qualified institutional buyer status.
Option D. Qualified institutional buyers — Correct answer
Answer: D. A QIP is directed to qualified institutional buyers, subject to the applicable issue rules. Remember: QIP eligibility follows the qualified institutional buyer category.
Hint, shown before you answer in practice mode: The placement route is designed for a defined institutional category. Common mistake: Treating a QIP like a retail public-offer application.
II-A-072easyconceptual
Q3What does an employee stock option normally give an employee before it is exercised?
Option A. A cash dividend paid on every unexercised option held
Why it is wrong: An unexercised option does not by itself create the same dividend right as a share.
Option B. A company bond paying a fixed coupon to the employee
Why it is wrong: An employee stock option is not a fixed-coupon company bond.
Option C. A conditional right to acquire shares under the scheme — Correct answer
Option D. Immediate ownership of every underlying share on grant
Why it is wrong: Granting an option does not itself allot the underlying shares.
Answer: C. An employee stock option gives a conditional right to acquire shares under the scheme, rather than immediate ownership of those shares. Remember: An option is not the same as an allotted share.
Hint, shown before you answer in practice mode: An option grant and an actual share allotment are different events. Common mistake: Counting all granted options as shares already owned.
II-A-073easyconceptual
Q4A rights issue offers two new shares for every five held. What is the entitlement on 750 eligible existing shares?
Option A. 1,875 shares
Why it is wrong: 1,875 shares reverses the rights ratio.
Option B. 375 shares
Why it is wrong: 375 shares applies one new share for every two held.
Option C. 150 shares
Why it is wrong: 150 shares applies one new share for every five instead of two.
Option D. 300 shares — Correct answer
Answer: D. The rights entitlement is 300 shares. Calculation: 750 ÷ 5 × 2 = 300 shares. Remember: A rights ratio states new shares offered relative to existing shares held.
Hint, shown before you answer in practice mode: Apply both parts of the new-share-to-existing-share ratio. Common mistake: Reversing the numerator and denominator in a rights ratio.
II-A-074mediumnumerical
Q5An investor accepts 240 rights shares at ₹75 each. The stated application payment is 40% of the price. What initial payment is required?
Option A. ₹30
Why it is wrong: ₹30 is the initial payment for only one share.
Option B. ₹10,800
Why it is wrong: ₹10,800 is the remaining 60% balance, not the initial payment.
Option C. ₹7,200 — Correct answer
Option D. ₹18,000
Why it is wrong: ₹18,000 is the full subscription price rather than the initial 40% payment.
Answer: C. The initial payment is ₹7,200. Application amount per share = ₹75 × 40% = ₹30. Total initial payment = 240 × ₹30 = ₹7,200. Remember: Partly payable rights issues separate the initial payment from later amounts due.
Hint, shown before you answer in practice mode: Work out the amount payable now on each accepted share. Common mistake: Paying or recording the full subscription amount when only the stated instalment is due.
II-A-075mediumnumerical
Q6An employee’s options become exercisable only after completing a stated service period. What does meeting this condition normally achieve?
Option A. Conversion of the employer’s loans into equity
Why it is wrong: The employee’s service condition does not convert the employer’s unrelated loans.
Option B. Automatic receipt of every future dividend
Why it is wrong: Vested but unexercised options do not automatically receive every future share dividend.
Option C. Automatic sale of the employer’s shares
Why it is wrong: Vesting does not itself sell any shares.
Option D. Vesting of the eligible options — Correct answer
Answer: D. Meeting the stated service condition normally causes eligible options to vest, after which exercise must still follow the scheme’s terms. Remember: Vesting and exercise are separate steps in an employee option scheme.
Hint, shown before you answer in practice mode: Distinguish earning eligibility to exercise from actually exercising or selling. Common mistake: Treating vested options as already exercised shares.
II-A-076mediumapplication
Q7A rights entitlement is expressly renounceable under its issue terms. The holder does not wish to subscribe. What may the holder do?
Option A. Demand the same number of free bonus shares
Why it is wrong: A right to subscribe is not a right to free bonus shares.
Option B. Convert the entitlement into an ordinary bank deposit
Why it is wrong: A rights entitlement cannot be converted into a bank deposit merely by instruction.
Option C. Transfer the entitlement through the permitted process — Correct answer
Option D. Require the issuer to refund the original market purchase price
Why it is wrong: Renunciation does not create a refund right for the original share purchase.
Answer: C. The holder may transfer a renounceable entitlement through the permitted process instead of subscribing personally. Remember: Renunciation transfers the subscription opportunity rather than the original shareholding.
Hint, shown before you answer in practice mode: The entitlement and the existing shares are different assets. Common mistake: Confusing transfer of a rights entitlement with sale of the existing shares.
II-A-077mediumapplication
Q8A ₹2,000 debenture converts 60% of its principal into equity at ₹120 per share. How many shares arise from one debenture?
Option A. 10 shares — Correct answer
Option B. 6.67 shares
Why it is wrong: 6.67 shares converts the remaining 40% debt portion instead of the 60% specified for conversion.
Option C. 16.67 shares
Why it is wrong: 16.67 shares converts the full principal rather than only the stated 60%.
Option D. 800 shares
Why it is wrong: 800 is the rupee amount of debt left unconverted, not a share quantity.
Answer: A. One debenture produces 10 shares. Convertible amount = ₹2,000 × 60% = ₹1,200. Shares = ₹1,200 ÷ ₹120 = 10. Remember: Part conversion leaves some debt outstanding rather than converting the whole principal.
Hint, shown before you answer in practice mode: Only the portion specified for conversion becomes equity. Common mistake: Using full principal when only part of a debenture converts.
II-A-078mediumnumerical
Q9A share trades at ₹120 before a one-for-four rights issue at ₹80. Assuming full subscription and no other change, what is its theoretical ex-rights price?
Option A. ₹112 — Correct answer
Option B. ₹100
Why it is wrong: ₹100 takes a simple average without weighting four old shares against one new share.
Option C. ₹128
Why it is wrong: ₹128 moves the price upward despite the discounted issue in this simplified calculation.
Option D. ₹80
Why it is wrong: ₹80 uses the rights price for every share and ignores the old shares’ value.
Answer: A. The theoretical ex-rights price is ₹112. Value of four old shares = 4 × ₹120 = ₹480. Add ₹80 for one rights share to get ₹560. Divide by five total shares to get ₹112. Remember: Theoretical ex-rights pricing weights both old shares and new subscription money.
Hint, shown before you answer in practice mode: Combine the value of the old shares with the new subscription money before spreading it across all shares. Common mistake: Averaging the two prices without using the rights ratio.
II-A-079hardnumerical
Q10Of 500 employee options, 300 are vested and exercisable at ₹80. The share value is ₹125. What is the exercise benefit on vested options before costs?
Option A. ₹37,500
Why it is wrong: ₹37,500 is the market value of the vested shares before paying the exercise price.
Option B. ₹22,500
Why it is wrong: ₹22,500 counts all 500 options, including the unvested ones.
Option C. ₹24,000
Why it is wrong: ₹24,000 is the exercise payment, not the benefit.
Option D. ₹13,500 — Correct answer
Answer: D. The exercise benefit on vested options is ₹13,500. Benefit per option = ₹125 − ₹80 = ₹45. Vested benefit = 300 × ₹45 = ₹13,500, before costs or taxes. Remember: Exercise economics apply to the eligible options and include the exercise payment.
Hint, shown before you answer in practice mode: Use only exercisable options and subtract the exercise payment from the share value. Common mistake: Including unvested options in an immediately exercisable benefit.
II-A-080hardnumerical
Modes of allotment of shares other than Public Offers: common questions
How many practice questions are there on Modes of allotment of shares other than Public Offers?
10 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-A, which has 150 questions in total.
Are these real NISM Series II-A questions on Modes of allotment of shares other than Public Offers?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
How much of the NISM Series II-A exam is Modes of allotment of shares other than Public Offers?
NISM's published syllabus outline gives it 2 of the paper's 100 marks, or 2% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: March 2025 Annexure I, Unit 8: Modes of allotment of shares other than Public Offers
Does negative marking apply to NISM Series II-A?
No. NISM applies no negative marking to Series II-A. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Processes related to Public Offering of Shares
10 questions on Processes related to Public Offering of Shares. Its quiz opens on that unit.
Open Processes related to Public Offering of SharesPaper Trading Try it on the practice trading desk