In 2023, 11 companies through rights issue raised Rs. 7,168 crore collected

Ahmedabad: The current year has seen an improvement in raising funds through rights issue. In the year 2023, 11 companies raised Rs 7,168 crore through rights issue, which last year 10 companies raised Rs 3,884 crore.

A rights issue is a mechanism available to listed companies to raise funds by offering new equity shares to existing shareholders. New shares are usually offered at a discount to the current market price to encourage investors to subscribe. If an existing investor does not wish to participate in the rights offering, other investors have the option to divest their shares.

Companies usually use a rights issue when the promoter group wants to retain its stake. Promoters invest their own money, so it helps send a positive signal to investors.

However, in recent times, Qualified Institutional Placement (QIP) has gained priority for raising funds in listed companies. Fund raising through rights issues has been weak over the years due to several macro issues, bankers said.

Companies raise money through rights issues when the market is depressed and share prices are low. QIPs are very bullish and there is a demand for good QIPs in the current market. When a company needs capital during a market rally, QIP is the first choice route.