Introduction
Many listed companies invite their existing shareholders to purchase more shares of the company at a discounted price. This offer is valid for a specific period and is known as a rights issue. It is different from an Initial Public Offering (IPO) since it is not offered to the general public but only to the existing shareholders.
Companies offer a rights issue for the benefit of their existing shareholders. This strategy improves the company’s reputation as it signals growth and displays a long-term commitment to its existing shareholders. It is also the quickest way to raise money.
The shareholder can decide whether to subscribe to the rights issue fully or partly. The additional shares are issued in proportion to the existing shareholding. If you are not interested in adding more shares of the company to your portfolio, you can let the rights lapse or transfer the Rights Entitlement (RE) to another person. The existing shareholder is not obligated to exercise the rights issue.
A rights issue can help you acquire extra shares at a premium to the market price. However, you are eligible for this offer only if you are a shareholder of the company on the record date.
The following companies are offering a rights issue in 2024. Study the company’s performance before deciding because the rights issue isn’t free like bonus shares.
Upcoming rights issues of shares in India
1. Sawaca Business Machines Ltd.
Sawaca Business Machines Ltd. is an Ahmadabad-based company established in 1994. It trades and exports machinery. Locally, it trades in metal scrap, cotton bales, and perfumery chemicals.
The company announced a rights issue, with an issue size of 457,639,600 equity shares aggregating up to Rs. 45.76 crores. The record date is March 7, 2024, and the issue price is Re. 1 per share. The rights ratio is 4:1, which means a shareholder holding one fully paid-up equity share on the record date is entitled to receive four rights equity shares.
The company is listed on the Bombay Stock Exchange (BSE) and has a market capitalisation worth Rs. 16 crores as of March 5, 2024.
2. Mercury Trade Links Ltd.
Mercury Trade Links Ltd. was incorporated in 1985. It is engaged in the trading of different agro products such as manures, fertilisers, pesticides, and plant or animal foods. The company also deals in a variety of agricultural produce.
Mercury Trade Links Ltd. announced a rights issue of 2,475,000 equity shares, accumulating Rs. 9.90 crores. The issue period is from March 11, 2024, to March 21, 2024. Shareholders with a company position on the record date (March 1, 2024) can receive REs. The rights ratio is set at 10:1, which means existing shareholders can receive ten rights equity shares for every one fully paid-up equity share.
The company is listed on BSE, and the issue price is Rs. 40 per share. The face value of the shares is Rs. 10 per share.
3. South Indian Bank
The South Indian Bank (SIB) is a Kerala-based leading private sector bank. It was founded on January 29, 1929 and became a scheduled bank under the Reserve Bank of India on August 7, 1946.
The bank has announced a rights issue, which will open on March 6, 2024, and close on March 20, 2024. The record date is February 27, 2024. The rights ratio is 1:4, which means shareholders are entitled to one equity share for every four fully paid-up equity shares they hold on the record date.
The issue size is 523,185,254 shares, accumulating to Rs. 1,151.00 crores. The issue price is Rs. 22 per share, and the bank is listed on BSE and the National Stock Exchange (NSE). The company’s market capitalisation was worth Rs. 7,887 crore as of March 5, 2024.
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​​​​​​​Conclusion
A company can announce a rights issue for various reasons like raising capital, fulfilling general corporate purposes, or meeting issue expenses. It allows existing shareholders to become major contributors. If you seek to add such companies to your portfolio, keep an eye on the three mentioned above and track the other rights issue of shares expected in 2024.
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