A rights issue is primarily offered by companies to raise additional capital for various purposes. The following are the main reasons why companies issue rights issues:
- Raising capital: To raise funds for business expansion, acquisitions or to finance projects without increasing debt.
- Debt reduction: Companies use rights issues to reduce their debt by raising equity and thus improve their financial health.
- Strengthening the balance sheet: By raising equity, companies can strengthen their balance sheet, making them more stable and less dependent on borrowing.
- Funding operations and growth: Companies may need additional funding to support day-to-day operations, research, and development or to pursue new growth opportunities.
- Shareholder benefits: Offering a rights issue allows existing shareholders to retain their stake in the company, avoiding dilution of their shareholding in the company.
