Airtel to open rights issue in October: What is rights issue and how to apply

Rights issue is a very popular way of raising funds for companies and can be very beneficial for investors as well. Let us understand what is rights issue and how to apply for it

Rights issue is one way that companies raise additional capital. It is an offer by a company to its existing shareholders to buy additional shares of the firm at a discounted price. It provides an opportunity to the shareholders to increase their stake in the firm. However, it is not mandatory for the shareholders to participate in the rights issue. They can choose not to buy any additional shares.

Rights issue is also used by companies to raise funds by offering a number of shares at a price lower than the current market price for a specified period.

Recently, telecom major Bharti Airtel a. came out with ₹21,000 crore rights issue which will open on October 5. This fundraising is mainly taken up by its competitors in the telecom market.

The issue size is 39.22 crore shares and the price of the rights issue shares will be ₹535 per fully paid-up equity share inclusive of face value ₹5 more premium ₹530 per equity share, the press release said. The stock is currently trading around ₹726 per share on BSE.

According to the release, a shareholder can purchase 1 rights issue share for every 14 shares as on the record date fixed on September 28.

Eligibility

All the shareholders who hold shares of the firm before the ex-date fixed by the firm are eligible for rights issue shares.

The company also notifies the shareholders of a record date when announcing an rgihts issue. This is the cut-off date set by the company.

India follows a T+2 rolling system, which means the ex-date is 2 days before the record date. An investor, if he wants to be eligible for the bonus issue, must buy the shares before the ex-date. Anyone who buys the stock on the ex-date will not be eligible.

For example, in the case of Airtel rights issue, the record date is set as September 28, so the ex-date would be September 26. Hence only shareholders, who hold shares of Airtel till September 25, will be eligible to buy the rights issue shares.

How to Buy Rights Issue Shares:

RTA

The first way to apply is through Registrar and Transfer Agent (RTA).

Phase 1: Go to the registrar’s website. The option to apply for rights issue will be visible only after it is opened. Click on “Apply for Rights Issue”.

Phase 2: Select the depository in which you have an account.

step 3: Enter your details like DP ID, Client ID, Captcha and click on submit.

step 4: Register your email id and mobile number so that you can get allotment details.

Step 5: Then pay the amount of shares you are entitled to through UPI of NEFT.

You will then be notified when rabbits will be allotted to you.

Internet Banking Account- ASBA Facility

You can also apply through your net banking account if you have ABA facility enabled. It is similar to applying for an IPO.

Phase 1: Log in to your net banking account and click on ‘Demat & ASBA Services’.

Phase 2: Under that click on IPO (Equity) – There you will find Company Name Rights Issue Apply button.

step 3: Enter your details like PAN, Demat number and select Depository.

step 4: make payment. In this case, your money will be blocked in your bank account till the allotment is done.

In both the cases, if the shares are not allotted to you, the money is returned to your bank account.

Rights issue is a very popular way of raising funds for companies and can be very beneficial for investors, as they get to increase their stake at a discounted price.