Issue of Right Shares

Manju Dhameja 28

INTRODUCTION

• MEANING

• WHY IT IS ISSUED

• WHEN IT IS ISSUED

THINGS TO CONSIDER BEFORE ISSUING

• Engaging a Dealer-Manager or Broker

Dealer to manage the Offering processes

• Selling Group and broker dealer

participation

• Subscription price per new share

• Number of new shares to be sold

• The value of rights vs. trading price of the

subscription rights

• The effect of rights on the value of the

current share

• The effect of rights to shareholders of

record and new shareholders and right

holders

THREE WAYS TO GO PUBLIC

• IPO

• NEW ISSUE

• RIGHT ISSUE

Procedure for issue of shares on rights basis in case of an unlisted company• Authorized share capital• Letter of Offer• Board's Approval• General meeting• Filing of resolution• Record Date/Book Closure• Drawing up list of members• Dispatching Letter of Offer• Collection and scrutiny of application

forms• Allotment• Allotment Letter/Share Certificates• Regret Letters/Refund Orders• Entry in the Register of Members

ADVANTAGES

• Shares at a discounted Rate

• Trading the rights on the market • Useful for Troubled companies

• Companies with clean balance sheets use them

BENEFITS OF ISSUING RIGHT SHARES

• More control on existing shareholders

• No loss to existing shareholder

• No cost for issuing shares to public

• Helpful to increase the goodwill of company

• Capital formation

• More scientific

STEPS FOR ISSUING RIGHT SHARES

1. Right shares must be in ratio of equity shares

of existing shareholders

2. Right Issue by 15 days notice

3. Right shares issue must not be opened more

than 60 days under SEBI guidelines.

OTHER FACTORS TO CONSIDER IN RIGHTS ISSUES

• Issue Costs

• Shareholder reactions

• Control

• Unlisted companies

• Religare Enterprises • Bampsl Securities • EIH• Central Bank of India • Zodiac Ventures Ltd • Brand Realty Services • Karnataka Bank • Lee & Nee Softwares (Exports) • Borax Morarji • Indo Asian Finan• Gayatri Projects• Ramsarup Industries • Muthoot Capital Services Rights Issue

CURRENT EXAMPLES

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