What is Right issues?

What is Right issue?

Right issue (Also called right offering) is a framework through which companies raise additional capital by a new issue of Equity shares to the existing shareholders at a discounted price. A company goes for the right issue for various reasons, such as expanding the business, acquiring new ventures, reducing debt, etc.  

The company will issue the Right Entitlement in the proportion of the shares held by their existing shareholders.

For Example, Company ‘MNC Ltd’ trading at ₹102 announces a Right issue of 3:5 (i.e., each investor holding 5 shares of MNC Ltd will be eligible to buy 3 shares) to the existing shareholders at a discounted price of ₹90. Mr. S, a shareholder of ‘MNC Ltd,’ holds 100 Qty. So, Mr. S will receive a Right Entitlement of 60 (100*3/5) shares. In simple terms, he will be eligible to buy 60 shares in such an issue.
    • Related Articles

    • What is Right Entitlement?

      A company issues a right to buy shares to its shareholders on a pre-determined date called the record date. Rights entitlements are offered to shareholders as a ratio to the number of securities held on this record date. A shareholder may refuse to ...
    • What are the timings of the OFS issue?

      The date of the issue will be announced by the company opting for OFS, whereas the timings of the OFS are between 9:30 AM and 3:30 PM. However, you must place the bidding for OFS before 3:00 PM. Note: Any OFS bids received after 3:00 PM will be ...
    • Can the buyer of the option execute his right at any time during the lifetime of the contract?

      No, the buyer of the option can execute his/her right only at the expiry of the contract.
    • What is the effect of selling a Call Option?

      The seller of the call option has an obligation to sell the underlying asset at the strike price if the buyer of the call option chooses to execute his right. The seller receives a ‘Premium’ from the buyer.
    • What is the effect of selling a Put Option?

      The seller of the put option has an obligation to buy the underlying asset at the strike price if the buyer chooses to execute his right. The seller receives a premium from the buyer.