Choice - Best Stock Broker in India

Menu

  • Invest
    • Stocks Icon
      Stocks
    • Commodities Icon
      Commodities
    • IPOs Icon
      IPOs
    • NPS Icon
      NPS
    • F&O Icon
      F&O
    • Bonds Icon
      Bonds
    • Mutual Funds Icon
      Mutual Funds
    •  Corporate FDs Icon
      Corporate FDs
    • MLD Icon
      MLD
    • AIF Icon
      AIF
    • Insurance Icon
      Insurance
    • PMS Icon
      PMS
  • Resources
    • Expert Assist
      • Research Icon
        Research
    • Learning
      • Choice Blog Icon
        Choice Blog
    • Calculators
      • Brokerage Calculator Icon
        Brokerage Calculator
      • Margin Calculator Icon
        Margin Calculator
      • SIP Calculator Icon
        SIP Calculator
  • About Us
  • Be a Partner
    • Authorised Partner Icon
      Authorised Partner
    • Mutual Fund Distributor Icon
      Mutual Fund Distributor
  • Pricing
  • Contact
  • Choice Group
    • Management Consultancy Icon
      Management Consultancy
    • Wealth Management Icon
      Wealth Management
    • Capital Advisory Icon
      Capital Advisory
    • Government Advisory Icon
      Government Advisory
    • Government Infrastructure Icon
      Government Infrastructure
    • Tax Advisory Icon
      Tax Advisory
    • Tax Advisory Icon
      Institutional Broking
  • Icon IconLogin
  • Login
  • Open Demat Account
  • Home
  • Blog
  • ...
  • Right Issue of Shares
  • ...
    Right Issue of Shares

Right Issue of Shares

Right Issue of Shares
  • Published Date: May 30, 2024
  • Updated Date: May 16, 2025
  • By Team Choice

A Rights Issue of shares offers a great opportunity for existing shareholders to boost their wealth. It allows existing shareholders of a company to buy additional shares at discounted prices lower than the current market value.

Rights Issue helps shareholders benefit from substantial capital gains as the company expands over the long term. Applying for a rights issue requires investors to understand its fundamentals, including key features, benefits, and how to apply for a rights issue.

This article will explore the rights issue meaning and their relation to shares in depth to provide useful insights and help you make informed decisions while you apply for upcoming right issues.

What is the Rights Issue Of Shares?

The rights issue of shares is a mechanism companies use to generate funds when faced with liquidity challenges by offering shares at discounted prices to their current shareholders. It allows companies to raise capital without incurring debts, and shareholders buy additional shares at a lower price from the company directly rather than the secondary market.

Key Features of Rights Issue

Proportionate Offering:

The issue of right shares is offered to company shareholders in proportion to the shares they are currently holding. Let’s simplify - if a shareholder owns 2% of shares, the company will offer them rights to buy 2% of new shares issued.

Discounted Rates/Prices:

Shareholders enjoy the benefit of buying additional shares at a lower price compared to the prevailing market rate.

Renounceable and Non-Renounceable:

  1. Renounceable Rights Issue: Shareholders can sell their rights to other investors if they do not wish to exercise them.
  2. Non-Renounceable Rights Issue: Shareholders cannot sell share rights to other investors.  If they don’t take the offer, the rights will lapse.

Aim:

Companies undertaking rights issue aims to raise more capital funds for expansion projects, debt repayments, or working capital requirements.

Dilution:

If shareholders refuse to exercise their rights, it would lead to the dilution of their rights. It happens because new shares are issued, increasing the number of outstanding shares.

Reason for Right Issue of Shares

  • Increase Capital Funds: Rights Issue can help companies raise capital for various purposes, including debt repayment, acquisitions, purchasing assets, etc.
  • Avoid Debt: To evade interest charges, this strategy uses equity rather than debt. It can help companies avoid taking loans as it is an expensive option.
  • Improve Debt-to-Equity Ratios: Rights Issuance can help troubled companies improve their debt-to-equity ratios, addressing shareholders’ concerns.
  • Strategic Planning: Companies not in financial distress can also opt for a rights issue to achieve other financial goals, like opening new premises or acquisition-related strategic planning.
  • Long-term Benefits: Rights issues can help shareholders profit substantial gains from the company’s increased capital over time.
  • Strengthen Financial Base: Companies can also utilise rights issuance as a flexible tool to strengthen their financial bases and pursue growth prospects.

Difference Between A Right Issue And A Bonus Issue

Before we explore the differences between Right and Bonus Issues, let’s first understand what is Bonus Issues.

Bonus Issues refers to the shares given as a gift to existing shareholders by a company. The company decides the process  of distributing free shares. Typically, shares are gifted to shareholders in proportion to their owned shares.

To simplify - if a company decides to issue a 5:1 bonus, one share would be given for every five shares owned.

Bonus issues vary from Rights Issues. Let’s take a look at the differences

Factors Rights Issue Bonus Issue
Goal Raise capital by selling additional shares to shareholders Gift free shares to shareholders out of profits earned
Purpose Leverage additional capital for the company to build a strong financial base Enhance trading processes by increasing the number of existing shares
Pricing Offered at a discounted price than the secondary market Free. No additional cost to shareholders
Payment of Shares Depending on the payment made by the shareholder (Full or partial payments) Shares are fully paid up and given to shareholders free of cost
Transferability Rights can be transferred fully or partially A transfer is not applicable
Shareholder Base Potential to broaden the shareholder base if current shareholders decline the rights issued Allocated to shareholders specifically

Conclusion

To conclude, rights issues can help improve the financial position and growth prospects of a company. Shareholders also leverage potential profit from the company’s growth. However, it is essential to analyse the factors affecting share prices, trading volume, and market conditions. It will help you make well-informed decisions based on your financial objectives and risk tolerance.

Recommended for you

loading

Copper Price Forecast for Next Week

loading

Indian Stock Market Prediction For Next Week

loading

FII DII Data - Live Data

loading

38 Candlestick Patterns Every Trader Should Know

Choice Financial Services

Choice International Limited , Sunil Patodia Tower,
J B Nagar, Andheri(East), Mumbai 400099.

Monday - Friday : 08:30 am - 7:00 pm
Saturday : 10:00 am - 4:00 pm

+91-88-2424-2424
care@choiceindia.com

Download App

Google PlayApp Store
QR Code

Social Media

  • Investment Options

  • Stocks
  • F&O
  • Commodities
  • Mutual Funds
  • IPOs
  • Bonds
  • NPS
  • Corporate FDs
  • MLD
  • AIF
  • PMS
  • Insurance
  • Resources

  • Research
  • Choice Blog
  • Brokerage Calculator
  • Margin Calculator
  • SIP Calculator
  • Downloads
  • Offer Document
  • Track Record
  • Investor Charter
  • Investor Grievances
  • Online KYC Updation
  • Quick Links

  • Open Demat Account
  • Corporate Demat Account
  • NRI Demat Account
  • Minor Demat Account
  • Lowest Brokerage
  • Investor Charter
  • Investor Awareness
  • Watchout Investors
  • Investor's Advisory
  • Disclaimer
  • CEBPL Policies & Disclosures
  • CFPL Policies & Disclosures
  • Sachet Portal
  • Direct Pay-in
  • Company

  • About Us
  • Investors
  • Pricing
  • Refer & Earn
  • Be a Partner
  • Read FAQs
  • Contact Us
  • Partner
  • Employee
  • Great Place To Work

  • Choice Financial Services

Choiceinternational. CIN - L67190MH1993PLC071117
Choice Equity Broking Private Limited: SEBI Reg No. Broking - INZ000160131 ( BSE - 3299 ) | ( NSE - 13773 ) | ( MSEI - 73200 ) | ( MCX - 40585 ) | ( NCDEX - 01006 ).
Depository Participant SEBI Reg. No. - IN - DP - 84 - 2015 , DP ID CDSL - 12066900 , NSDL ID - IN301895. Research Analyst - INH000000222
Choice Wealth Private Limited: AMFI - Registered Mutual Fund Distributor. Association of Mutual Funds in India Registration Number - ARN - 78908.
Initial Registration: 15th March 2010 Valid Till: 14th March 2027.
Pension Fund Regulatory and Development Authority (PFRDA) - POPSE52022022 | Affiliated with POP HDFC Pension Management Company.
Choice Finserv Private Limited: NBFC Registration Number : N - 13.02216

Choice Insurance Broking Private Limited: IRDAI License No: 167, License Valid Till: 29-05-2025 | Category : Direct ( Life & General )
Registered Office: Choice International Limited, Sunil Patodia Tower, J B Nagar, Andheri East, Mumbai, Maharashtra 400099.
For any Grievances / Queries email at ig@choiceindia.com & care@choiceindia.com | Online Dispute Resolution Link: https://smartodr.in/login

Cautionary Message :

  1. Sharing of trading credentials – login id & passwords including OTP’s:- Keep Your Password/Pin and OTP’s private & confidential to avoid any misuse or unauthorised trades. Please ensure that you do not share it with any one.
  2. Trading in leveraged products like options without proper understanding, which could lead to losses
  3. Writing / selling options or trading in option strategies based on tips, without basic knowledge & understanding of the product and its risks
  4. Dealing in unsolicited tips through Whatsapp, Telegram, YouTube, Facebook, SMS, calls, etc.
  5. Trading in “Options” based on recommendations from unauthorised / unregistered investment advisors and influencers

Disclaimer:
1. *Investments in securities market are subject to market risks, read all the related documents carefully before investing.
2. In addition to client based business, we are also doing proprietary trading.
3. Brokerage will not exceed the SEBI prescribed limit.

Research Disclaimer and Disclosure inter-alia as required under Securities and Exchange Board of India (Research Analysts) Regulations, 2014

Choice Equity Broking Private Limited (“CEBPL”) is a registered Research Analyst Entity (Reg. No. INH000000222 ) (hereinafter be referred as “CEBPL”). (CIN. NO.: U65999MH2010PTC198714).

Reg. Address: Sunil Patodia Tower, J B Nagar, Andheri(East), Mumbai 400099. Tel. No. 022-6707 9999 .

Compliance Officer: Mr.Prashant Salian. Tel. 022-67079999 - Ext-2310
Email- Prashant.salian@choiceindia.com

Grievance officer: Deepika Singhvi Tel.022-67079999- Ext-834.
Email- ig@choiceindia.com

Research Disclaimer: Investment in the securities market is subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Beware of Fraudulent Entities Claiming to Be Choice or Its Associates:

This is to inform you all that our official website is choiceindia.com
Please be advised that any person or business claiming to be "Choice" or using a similar name/logo without our official website domain is not associated with us. Do not make payment to any third person bank account. Payments for our services should be made only if bank account is in the name of Choice Equity Broking Private Limited and you can verify the bank details from our official website as above. We are committed to maintain the highest standards of integrity and transparency, and we urge our customers and the public at large to exercise caution and verify the authenticity of any entity claiming to be associated with Choice and do not fall prey to such fraudulent entities.

© Choice International Limited. All Rights Reserved.

  • Privacy Policy
  • Terms & Conditions