Right Issues Unveiled: A Comprehensive Guide for Investors

Right Issues Unveiled A Comprehensive Guide for Investors

A right issue, also known as rights offering, is a unique corporate action that offers existing shareholders the opportunity to acquire additional shares at a discounted rate, usually lower than the prevailing market price. It’s one of the several ways a company can raise funds from the equity market. This guide is curated to provide a comprehensive understanding of rights-issues and discerning insights on how to convert them into a strategic investment tool.

Right-Issues: An Overview

In a rights issue, the company sets a record date for determining the eligibility of shareholders for the issue. Shareholders then get a ‘rights’ entitlement according to their existing shareholding ratio. For example, if an investor holds 100 shares of a company that offers 1:2 rights (one new share for every two existing shares), then they are entitled to 50 additional shares.

The company sets an offer price for these rights shares, which is typically lower than the current market price. If the company’s shares are trading at Rs. 100 per share and the rights issue price is Rs. 70 per share, the shareholder can procure the rights shares at a notable discount.

Should You Subscribe to a Rights Issue?

Deciding whether or not to partake in a rights issue can be influenced by several factors such as the company’s growth prospects, the purpose of funds being raised, the current market price of the shares, the offer price, among others. It is pivotal for investors to thoroughly scrutinize these variables before making a decision.

How to Buy US Stocks from India?

US stocks have grown lucrative for Indian investors given their vast offerings and potential for substantial returns. With the advent of digital investing platforms, acquiring US stocks from India has become considerably easy.

Firstly, investors need to open an international trading account with brokerage firms that facilitate foreign trading. This process usually involves KYC verification and submission of requisite legal and financial declarations. Post successful registration and requisite fund transfer, investors will be able to buy US stocks from India.

As of the RBI’s Liberalized Remittance Scheme (LRS), Indian residents can now send up to $250,000 overseas per financial year for investing in foreign stocks. This roughly amounts to approximately Rs. 1.8 crores (as per the current exchange rate of Rs.72 per dollar), making investing in US stocks quite accessible for Indian investors.

Disclaimer

Investing in stocks carries inherent risks and should not be undertaken without thorough research and due consideration. This is especially true for foreign markets which may come with additional regulatory impositions and market variances. Although rights-issues may sound fascinating due to the discount offered, it can be detrimental if the company fails to achieve its growth objectives.

Similarly, while investing in US stocks may offer diversification, one should consider the foreign exchange risks, tax implications, and changes in global market dynamics. So, it is always recommended for the investor to gauge all the pros and cons of trading in the Indian stock market and abroad, understand their risk profile, investment horizon, and anticipated returns before making any investment decisions.

Investors can use investment apps for multiple investment purposes like FD, trading, mutual funds etc. Download Bajaj Finserv app and make your trading fast and easy. 

In conclusion, right-issues can be a rewarding investment strategy when navigated mindfully. The attraction towards foreign stock as an additional investment avenue is indeed promising but should be undertaken with caution and comprehensive market understanding. Investors are recommended to rely on legitimate sources of information before making any investment decisions.

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