Right issue means issuing of extra shares. In order to avoid dillution of stake of existing shareholders, a company may raise additional capital from its members by issuing “rights” shares in proportion of their current holding. Private placement is a common method of raising business capital through offering equity shares or other securities directly to a limited number of investors. Preferential allotment is the process by which allotment of shares is done on a preferential basis to a select group of investors.A company may plan to raise funds for its future expansion and reducing debts through preferential allotment.