Glossarytaught in M0.02, M1.09
Rights issue
Also called rights offer, rights entitlement.
An offer of new shares to existing shareholders, usually at a discount, in proportion to what they already hold. Unlike a bonus it raises real money.
A one-for-four rights issue at ₹800 when the share trades at ₹1,200 gives a theoretical ex-rights price of ₹1,120.
If you take up the rights, you're unaffected in value terms. If you do nothing, you're diluted. So the entitlement itself is tradeable on Indian exchanges, and it should be sold, never left to lapse.
The reason for the raise is the analysis. Money for a specific, high-return project is different from money to repay debt the business couldn't service.
Read the objects of the issue, then the balance sheet.
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