Rights Issues 2021

Rights Issue is an invitation to the existing shareholders to purchase the additional shares of the company within a specific period at a discounted price. Unlike IPO, the rights issue is not offered to the general public but only to the existing shareholders in proportion of their existing holdings.

The eligible shareholders can either subscribe for the rights issue partly or fully; or can let the rights lapse by not opting to exercise their rights to purchase the additional shares; or can transfer their rights entitlements to other persons. The transfer of rights to other persons can be done by the trading of rights entitlements on a stock exchange similar to equity shares known as 'renunciation of rights issue'.

The rights issue offers benefits to eligible shareholders as it helps them acquire additional shares at a premium compared to the market price. However, one should study the company's performance before subscribing to the issue as unlike bonus shares, the rights issue comes with a price.

Note:

• The offer to buy a rights issue is an option and not an obligation on the existing shareholder.
• To be eligible for the rights issue, one must be the shareholder of the company as on record date to qualify as an existing shareholder.
• An existing shareholder subscribing to the rights issue in full can opt to subscribe for additional shares as well. The allotment for the additional shares would be based on the issue subscription.
• The rights issue can be partly subscribed and partly transferred to other investors by the trading of the rights entitlements. However, in such cases, there will be no option to opt for additional shares over and above the allocated rights issue for either of the parties.
• The rights entitlements (RE) are given a different ISIN to differentiate from the normal equity shares trading in the market.
• The trading of RE closes 2-3 working days before the rights issue.

Learn more about Rights Issue of Shares

• Rights Issue Definition, Benefits, Eligibility and Prices
• Rights Issue Entitlement
• Rights Issue Glossary - Definitions, Abbreviations and Meaning
• Rights Issue Review