WHAT IS A RIGHT ISSUE ? | உரிமை வெளியீடு என்றால் என்ன ?

 

WHAT IS THE RIGHT ISSUE? :

In the previous post, we would have seen about the Bonus share issue. It is nothing but the issuing of additional shares to the shareholders for free. It leads to the current share price correction. But, in the case of the Right issue, in a similar way to the Bonus share issue, shares are issued to the shareholders but the only difference here is that the shares are not issued for free of cost. Instead, they are issued at a discounted price. This is known as the Right issue.

ADVANTAGE OF RIGHT ISSUE:

1. Shares will be available at a discounted price for the shareholders to buy.
2. It will increase the shareholding of the company.
3. It will be useful for the company to raise capital.
4. The money that the company gains can be used to pay off its debt.

Now the question is, Is it mandatory for you to buy the shares offered by the company?

The answer is absolute no. It is not mandatory to buy the right issue of shares offered by the company. It is up to your sole decision whether you are buying or not. Now, more shares are available in the market for the same amount of capital, thus, the share price may fall as the number of shares grows.

HOW TO FIND THE RIGHT ISSUE IS GOOD FOR YOU OR NOT? :

There is a mathematical formula available to calculate it, which is TERP (Theoretical Ex Right Price).

TERP = (What you are offered + What you already have) / Total Number of Shares

What you are offered = Number of shares offered in the Right issue * discounted price

What you already have = Number of shares held * Current Market Price

Total Number of shares = Shares held + Shares offered

Let us see this TERP calculation with an example Let us consider that you have 20 shares of Infosys Ltd at a current market price of ₹1600 per share. Now Infosys Issues a Bonus issue for a share price of ₹1300 per share. You bought another 20 shares for ₹1300 per share. Now,

What you are offered = Number of shares offered in the Right issue * discounted price = 20 *1300 = 26,000.

What you already have = Number of shares held * Current Market Price = 20 * 1600 = 32,000.

Total Number of shares = Shares held + Shares offered = 20+20 =40

TERP = (What you are offered + What you already have) / Total Number of Shares = (26,000 + 32,000) / 40 = 1450.

Thus TERP will be ₹1450 per share.

 

RENOUNCEABLE SHARES: 

Selling the right issue shares in the open market is called Renounceable shares. It means that you have the right, as per the company's policy, to sell out the shares to someone else when you don't want to buy them. It is known as Renounceable Rights.

 As an investor, you should not be swayed by the discount offered by the companies. However, you should also check the TERP, the current market price, and the company's future financial prospects before deciding whether to invest.

DISCLAIMER:-

The content of this site is only for educational purpose. I am not SEBI Registered. The motive of this site is to share my knowledge on share market to new budding investors and others who are learning about stock market

My Kind request to my site viewers, Before taking any decision please do self analysis, consult or discuss with Your financial Advisor .

மறுப்பு:-

இந்த தளத்தின் உள்ளடக்கம் கல்வி நோக்கத்திற்காக மட்டுமே. நான் செபியில் பதிவு செய்யப்படவில்லை. இந்த தளத்தின் நோக்கம், பங்குச் சந்தையைப் பற்றிய எனது அறிவை புதிய வளரும் முதலீட்டாளர்கள் மற்றும் பங்குச் சந்தையைப் பற்றி அறிந்துகொள்ளும் மற்றவர்களுக்குப் பகிர்வதாகும்

எனது தள பார்வையாளர்களுக்கு எனது அன்பான வேண்டுகோள், எந்தவொரு முடிவையும் எடுப்பதற்கு முன், சுய பகுப்பாய்வு செய்யுங்கள், ஆலோசனை செய்யுங்கள் அல்லது உங்கள் நிதி ஆலோசகருடன் விவாதிக்கவும்.