Rights are an opportunity for existing shareholders to buy additional shares at a discounted price.
If Reliance Industries needs more funds, they may offer current shareholders a chance to buy new shares before others, usually at a lower price.
For example, if you own 100 shares of Reliance and they announce a 1:2 rights issue at ₹1000 per share, it means for every 2 shares you own, you can buy 1 additional share at ₹1000. So, you could buy 50 more shares for ₹50,000.
Rights Issue Process:
1. Announcement: The company announces the rights issue, detailing new shares, price, and ratio.
2. Record Date: Determines eligibility; shareholders on this date receive rights.
3. Issuance of Rights Entitlements: Eligible shareholders receive entitlements to buy new shares.
4. Trading Period: Rights can be traded on the stock exchange.
5. Exercise Period: Time to use rights to buy new shares.
6. Allotment of Shares: New shares are given to those who exercised their rights.
7. Adjustment in Share Price: The market price adjusts post-issue.
Stages of Rights Entitlements:
1. Declaration: Company announces the rights issue.
2. Issue: Rights are credited to shareholders.
3. Listing: Rights entitlements begin trading.
4. Trading Discontinued: Rights trading ends after a cutoff date.
5. Expire: Unused rights become worthless after expiry.