Rights Issue

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Rights Issue

Explanation: A Rights Issue is a method through which a company raises additional capital by offering existing shareholders the right to purchase new shares at a discounted price, typically in proportion to their existing shareholding. This allows shareholders to maintain their proportional ownership in the company by subscribing to the new shares, which are usually offered at a lower price than the prevailing market price. Rights issues are often used by companies to fund expansion plans, reduce debt, or strengthen their balance sheets.

Example: Grasim conducted a Rights Issue in January 2024, wherein it offered existing shareholders the opportunity to purchase additional shares at a discounted price. Shareholders were given the right to subscribe to a certain number of new shares based on their existing shareholding in Grasim. By participating in the Rights Issue, shareholders could increase their ownership stake in the company and potentially benefit from its future growth prospects.

In the context of a Rights Issue, the ex date and record date are important dates that determine which shareholders are eligible to participate in the Rights Issue.

Ex Date: The ex date, short for “excluding date,” is the date on which the rights entitlements for the Rights Issue are traded separately from the company’s shares. Investors who purchase shares on or after the ex date are not entitled to participate in the Rights Issue.

Record Date: The record date is the date on which the company determines the list of shareholders who are eligible to participate in the Rights Issue. Investors who are listed as shareholders on the record date are entitled to receive the rights entitlements and can choose to exercise their rights to subscribe to the new shares.

You can view the Rights Issue on Radar under Corporate Action in the Corporate Info & News section.

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