Upcoming Rights Issue in 2025

A rights issue is a method by which a company raises capital by offering existing shareholders the opportunity to buy additional shares at a discounted price, typically in proportion to their existing holdings. This allows the company to raise funds without seeking external investors and can help maintain the proportionate ownership of existing shareholders.

Reasons for Rights Issue

Companies may opt for a rights issue for several reasons:

• Capital Raise : One primary reason is to raise capital for various purposes such as funding expansion plans, reducing debt, financing acquisitions, or investing in new projects.

• Financial Stability : It can improve the company's financial stability by increasing its capital base, which may enhance its ability to weather economic downturns or unexpected financial challenges.

• Avoiding Dilution : Offering shares to existing shareholders allows the company to raise funds without diluting their ownership stake significantly. This can be preferable to issuing new shares to external investors, which could dilute existing shareholders' ownership.

• Lower Cost of Capital : Since rights issues are typically offered at a discount to the current market price, existing shareholders may see it as an opportunity to invest at a lower cost per share than what they would pay in the open market. This can make the rights issue an attractive option for raising capital.

• Flexibility : Rights issues offer flexibility in timing and pricing compared to other methods of raising capital, such as public offerings. The company can decide when to initiate the rights issue and set the subscription price based on market conditions and its financing needs.

Overall, a rights issue can be a strategic tool for companies to strengthen their financial position, pursue growth opportunities, and meet their long-term objectives.

Advantages of Rights Issue:

• Capital Raise: Rights issues provide a straightforward method for companies to raise capital quickly. By offering additional shares to existing shareholders, the company can generate funds for various purposes such as expansion, debt reduction, or investment in new projects.

• Maintaining Ownership Control: Since rights issues allow existing shareholders to purchase additional shares in proportion to their existing holdings, it helps maintain their proportional ownership in the company. This can be advantageous for management and existing investors who want to avoid dilution of their control and influence.

• Cost-Effective: Compared to other methods of raising capital, such as public offerings or private placements, rights issues can be more cost-effective. There are typically fewer fees associated with rights issues, making them a more economical option for companies seeking to raise funds.

• Market Signal: A rights issue can be seen as a positive signal by investors, indicating that the company is confident about its future prospects and is taking proactive steps to strengthen its financial position. This can boost investor confidence and potentially lead to increased share prices.

• Flexibility:Rights issues offer flexibility in terms of timing and pricing. Companies can choose when to initiate the rights issue and set the subscription price based on market conditions and their financing needs. This flexibility allows companies to adapt the rights issue to suit their specific requirements.

• Shareholder Participation: Rights issues give existing shareholders the opportunity to participate in the capital raise, potentially at a discounted price. This can enhance shareholder loyalty and engagement, as shareholders are given preferential treatment in accessing new shares.