Study of rights issue done by Listed companies in India over 5 years from 2021 to 2025.
Article published on Monday, 12th
January, at 8:00 p.m.
This is an extensive study of over 450 rights issue done over the last 5 year from 2021 to 2025.
Findings;If one bought share with rights (just before record date) and sold all shares on listing the stats are as follows
Total issues analysed; 458
Average returns; 0.87%
Median returns; -4.98%
% of issues with positive returns; 176
% of issues with non-positive returns; 282
(280 with negative returns and 2 with 0 returns)
This article will be updated soon; in the meanwhile, here is the link for the excel sheet if one wishes to his/her own analysis.
Excel sheet: download link
(Pdf of the study to be created and to be uploaded as well.)
Draft content: to be edited
Tradable Rights entitlement a new innovation came with
Reliance industries massive rights issue of 2020. It was the first time when
rights entitlement were tradable.
https://www.ril.com/sites/default/files/2023-01/Media-Release-03062020.pdf
Monday 30th Jan, 2023 was double settlement for
trades done on
25th Jan, Wednesday (26th being
holiday) and done on 27th Jan, Friday
For all record dates on and prior to 30th Jan,
T+2 system is taken,
(However, some stock still traded on t+1 basis, but we’ve
taken t+2 as it doesn’t make much difference)
And for all record dates after 30th jan, 2023, T+1
system is taken.
On BSE and NSE website I found the following
“SEBI via Circular no.
SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20 dated March 21,2024 provided guidelines on
Introduction of Beta version of T+0 rolling settlement cycle on optional basis
in addition to the existing T+1 settlement cycle in Equity Cash Markets. In
view of the same Exchange via notice no 20240322-48 introduced trading in
securities under T+0 settlement mechanism with effect from Thursday March
28,2024. The following are trading parameters for the same”
So for all issues with record date after 28th
march 2024 record date could be the “date with rights”
Lots of issues like price difference due to liquidity issue
between NSE and BSE between the 2 dates, so price discrepancy is SEEN.
Eg
For Natural capsules price on 10th &11th
Nov, 2021 on BSE is 217.40 and 170.60
https://www.bseindia.com/markets/equity/EQReports/StockPrcHistori.aspx
on NSE shows “No
Records”
and after searching I came to know it listed on NSE in
Febraury of 2025.
So price on investing.com should be based on BSE still there
is discrepancy
As closing prices on 10th and 11th Nov
are 178.27 and 170.60 respectively. (record date is 12th Nov,2021)
Interesting lessons learnt during the study was how
RE’s rights entitlement are tradable, but many people lose
money by buying and not applying, or applying and not getting allotment.
Seems unjust? Doesn’t it?
Prima facie seems like it, assume “I” buy RE from open
market and apply in rights issue,
But because the subscription does not meet minimum
subscription criteria, it is shelved.
In this case I am infringed upon my ability to acquire share
at rate lower than market price.
But during the study I also found usually when issues fail,
they are not worth subscribing to in the first place, weak fundamenetals,
artificially inflated share price which might crash shortly even below rights
issue price.
So all in all.
YES it is a loss for buyer of RE’s but still a smaller loss
compared to investing huge sums and making larger losses when price of such
companies crash.
Funnily there are companies that have current market cap
less than the amount of money raised by rights, that should give idea how bogus
these issues were.
In case where the issue does not garger
SMC credit ltd page 15
https://www.bseindia.com/downloads/ipo/LOO_071220221129.pdf
“In case the rights issue remains unsubscribed and/ or
minimum subscription is not achieved, the Board of Directors may dispose of
such unsubscribed portion in the best interest of the Company and in compliance
with the applicable laws.”
Limitations of the study:
>inconsistency among traded stocks, some stocks had T+1
and some had T+2 settlement before 30th Jan, 2023. Thus for accurate
prices, we’ve referred to ex-rights price in LOF (Letter OF offer) on which
basis the price are taken by figuring out the appropriate dates which match the
values. These may not have any material impact, however if someone is willing
to do further research and analysis this point shall be taken into account.
>Some issues are illiquid, non-traded for weeks, months
and years.
Data has been filed based on Last traded price.
>Some companies don’t have working website where LOF could
be found,
Many “Basis Of Allotment” PDF’s are heavily pixelated hence
aren’t taken into consideration for any kind of data research and analysis.
>presence of outliers in data, due to low liquidity there
are instance where return between “price with rights” and “date of listing” are
above 100%. However -100% isn’t possible as no stocks are traded at 0.
Similarly, there are instances where rights issue of
illiquid stocks is done at price higher than that of market price/last traded
price.
Example being of “Ridhi Synthetics ltd” done successfully in
Dec2021/Jan2022.
>Stock are delisted meaning no longer traded today, thus
getting data is difficult for eg. “Thambbi modern spinning mills ltd”
>Use of ChatGPT to generate ticker codes for BSE &
NSE as input feed for googlefinance formulae. However, for stocks listed on
either of one exchanged its observed that fake/incorrect codes were generated
at times. This came to my notice while fetching price of “AKG EXIM ltd” from
BSE (incorrect code generated; BSE:531585).
Came to know it was NSE only listed company. So im not sure
how many other random instances are there where codes provided are incorrect.
Care for this is taken by comparing the price derived by
googlefinance (as on 26th December) by prices provided by Chittorgarh
as CMP (data tables were copy pasted between 12th and 15th
of December. If deviation of more than 20% is seen, manual
checking/verification has been done. (In case of AKG exim this quote wasn’t
available off of Chittorgarh table, however we already have manually verified
the data in this case.)
>Incorrect listing dates, there are cases (eg Globalspace
technologies ltd) where date of credit is later than that of listing date
mentioned in LOF, in this case BOA confirms the date is later than credit date.
In such cases accuracy to that extend may be affected.
>Incorrect and Confusing LOF data, for example in case of
“Brooks laboratories ltd”
https://www.brookslabs.net/assets/pdf/right-issue/2023/LetterofOffer.pdf
the ex-rights price stated on pg no.36 is 70.10
while the ratio is 1 Right at ₹75 for 16 shares held, market
price being 89.80 and 87.38 on 27th July and 28th July
(record date) respectively. It’s a clear mistake as ex-rights price has to be
between market price with rights and rights issue price, that is between 89.80
and 75.
>Some issues have failed for eg” shree ram proteins ltd”
the method of computing gains/loss should be different. However same formula is
used here.
Had correct been use the resultant percentage of gains would
be lower and percentage of loss would be higher.
>in our computation we have assumed that we apply for
only the entitled Rights shares. However in real-world due to over-application
and over-allotment the actual percentage of gains would be higher and
percentage of losses would be lower. This strategy however ensures higher
allotment in losing trades (due to them being undersubscribed) and only
slightly extra allotment where issues are in demand and are over-subscribed
>https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=3&ssid=15&smid=12
SEBI website has option for viewing rights issue documents
filled, I was checking it for “LOF” of few companies where their websites
aren’t operational or they have been admitted into IBC. However, I realised
SEBI website doesn’t host many of these necessary documents, then what’s the
point of filing these documents with SEBI or stock exchanges if they are not
going to host these documents towards public.
>cases where stock is in GSM or not traded for some time,
price of day immediate to listing date mentioned in LOF is taken. Example in
case of “praxis retail ltd” for rights issue of May/June 2023 the listing date
is mentioned as 30/06/23
However, it being in GSM it traded only on Mondays, i.e.
26/06/23 and next on 03/07/23
Thus, price of 03/07/23 is taken
>this
study is prone to Misclassification/misdeclaration given by companies/promoters.
To see example please refer to the case of Earum Pharmaceuticals ltd” now “Murae organisor ltd”
The promoters have said they'll subscribe to rights issue
(refer pg no42 of LOF),
On same pg.no 42, the only two promoters
(refer pg no.23) “Bhumishth Narendrabhai Patel” & “Payal Bhumishth Patel”
hold NO SHARES AS OF 31st march 2023. what does this mean? in their letter
dated 24th Jan 2023 they undertake to subscribe to ZERO shares?
As per letter dated 24th Jan on behalf of
promoter and promoter group undertaking to subscribe to rights issue was given,
the promoter entity “Auxilia Pharmaceuticals Private Limited”
Had 140 shares as on 31th march 2023 and after rights issue
the number was same at 140 shares (as per shareholding pattern of June
2023)
BSE march
2024 shareholding pattern
maybe they did subscribe and sell in open market? If that
was the case, there isn’t single notice to exchanges for sale/disposal of
shares in the June and September quarter of 2023, but one thing that was
noticeable was resignation of directorates, resignation of statutory auditors
in disclosures dated 23/08/23;
25/08/23
& 23/08/23
There is also this interesting disclosure given to exchanges
about “misprint”
Here is the link
It talks about how minimum subscription isn’t applicable if
promoters undertake to fully subscribe their portion. However, what portion? They
hold 0 shares.
And in case of corporate entity even that condition is
violated, there was no subscription or allotment at all to them.
Legally they may say it was only “INTENTION” and not
“COMMITMENT” in LOF, but as per letter dated 24th it said they
provided “Undertaking” to subscribe.
>Oh Boy oh Boy!! I was crying & laughing at the
comedy of some of these issues…
This company called “AF enterprises ltd” comes out with a rights issue of 42.91 crores
and states the issue is underwritten by Merchant banker “M/s First overseas capital”
Refer to page no.22 of LOF
“Further, this is to submit that the Company has
voluntarily entered into an Underwriting agreement dated 25th January, 2023
with M/s. First Overseas Capital Limited, a SEBI registered Category I Merchant
Banker to underwrite the issue only to the extent of entitlement of
shareholders other than the promoters and promoter group”
Now the issue isn’t subscribed, they extent the date, and it
was still undersubscribed. They serve the notice to merchant banker asking to
fulfil their obligation of subscribing the unsubscribed portion of the issue.
(Exchange notices dated 23/05/23;
25/05/23
& 03/07/23)
The underwriters didn’t subscribe, finally, the issue was devolved,
they refunded all the monies to applicants (₹19 per share compared to market
price range of around ₹11 to ₹15 at that time)
A “SEBI Registered” merchant banker failing to honour the underwriting
of the issue!? And the company allowed it!? It’s a circus going on, full on
comedy circus!!
When a SEBI-registered merchant banker can sign an
underwriting agreement and then simply not honour it, the obvious question is:
how, exactly, is that registration being regulated?
In the end, it is what it is. Everyone seems to know their
role in the drama. Disappointing…
>Companies came with rights issue instead of QIP or FPO
to achieve compliance with minimum public shareholding. For eg “MKVentures
capital ltd” in April 2023 and “Viceroy Hotels ltd” in November 2024. Thus
intent expressed by promoters was to not subscribe to rights issue as per LOF.
Such exceptional cases may affect final data analysis.
>Share India securities came with unique rights issue
in Feb/March of 2023
Issue had the ratio of 1 right + 17 detachable warrants for
every 50 shares.
Both rights and warrants issued at ₹700
In such case rights and warrants could be consolidated for
computation of gain/loss while applying. we assume investor applies for
warrants, holds it, exercises it immediately and sell them. So ratio is taken
as 18 Rights for 50 shares for computation purpose in our excel sheet.
>While gathering data, I had a realisation of how
thoughtfully stock exchange systems are built. Imagine building something like
this from scratch; preserving years of filings, staying resilient against cyber
threats, and continually accommodating new listings.
The amount of planning and designing that went into
creating these systems… wonderful!!
These are art pieces. People use the phrase “state of the
art” these exchanges are exactly that!! “ STATE OF THE ART”
People appreciate music, movies, paintings, and stories
as art, and rightly so. But those who can see the magnificence, scale, and
technology behind these platforms will appreciate them as art as well.
While gathering data it made me appreciate how
well-designed the existing systems are
lots of appreciation to the people working behind the
scenes who built and continue to maintain it.
Also I planned on completing and finishing my research by 26th
of December, however due to underestimation of difficulties it got delayed.
Made me realise how easy this research became due to computer, just imagine
doing all this on mobile phone!?
There are people smarter and more hardworking than me, but
due to circumstances and limitation of resources such research isn’t done. Im thankful
of having resources, computer, internet, working usable websites, well
preserved documents (In most cases) and overall I was happy to do this
research, gave me some good insights aswell.
>it’s a common observation that many companies bring
rights issue just below 50 crores like “Shangar décor ltd” with issue size of
49.35 Crores; “mercury tradelinks ltd” with issue size of 48.95 crores. The
promoters had expressed intention to not fully subscribe to rights issue, but
in reality, they have only subscribed a small token/gesture amount. And in case
of “mercury tradelinks” promoter holding is 0%; holding 0 shares.
And in today’s market they both are trading between 10 to 20
crores of marketcap after having completed rights issue successfully.
>Google finance not working for SME companies; prices
aren’t being fetched.
The same is fetched using Chittorgarh website as on 31st
December and appropriate multiplier is used for split and bonus corporate
actions.
>‘One is failure, another is fraud’
In the case of rights issue of “Ind renewable energy” that came in January 2024;
Promoters showed intent to subscribe fully and also apply
for additional rights.
Promoters did subscribe and eventually increased their stake
as well, however the next quarter itself they offloaded entirely, their
shareholding going from 14.36% to 38.59% to 0.72% to 0.07% from Dec23, Mar24,
June24, Sept24 quarters.
FY25 annual report is still not filed, most of the monies
went as loan and advances. money was diverted and not used for purpose as
stated in "Objects of the issue"
Pg no. 50 of the LOF
filed
Here’s the march2025
quarter result filed with exchanges, after than in Q1 some other auditor has
signed, where is the AGM? No AGM was conducted.
It didn’t matter from the start, because the gameplan was
set, whatever the proceeds of the issue are, were already promised to the recipients
of “loans and advances” plus promoters got more money by selling the shares in
open market.
By the way, who are these merchant bankers? “NAVIGANT CORPORATE ADVISORS LIMITED”
they are in fact listed entity on BSE SME platform.
>Another case of company named Annvrridhhi Ventures ltd
(Formerly J. Taparia Projects Ltd)
Came with 2 rights issue; 1st on 11th
April 2025
As per information given in LOF promoters showed intent to
subscribe to rights issue, and also over they may apply for additional shares
(Pg. no 52 of LOF and pg. no 56 of PDF, LOF
link)
However, the rights issue was only subscribed by 0.31 times
by last date, while promoter holdings were at 57.06% (March and June quarter
SHP)
Indicating that promoters hadn’t applied for rights issue,
also if promoters give assurance for fully subscribing to rights issue there
isn’t any need for minimum 90% subscription as per Regulation 86 of the SEBI
ICDR Regulations
However, the same relaxation was ignored, rights issue was
not applied/subscribed by promoters and issue was shelved.
Promoters were expecting innocent public shareholders to
apply for rights, which didn’t happen in this case.
They launched another rights issue on 7th November
2025;
Assuring subscription and applying for undersubscribed
portion, now this was subscribed by 0.87x
The shares were issued, and overall promoter stake increased
after it dipped to 45.91% in Sept quarter 2025 to 56.06% as on 17th
December 2025.
I was just going through my research, and here’s why its
important
Let’s look at the case of Franklin Industries ltd; it came
with 2 rights issues, 1st in month of May in 2024 at ₹3.58; 2nd
in June of 2025 at ₹1.00 (Price as on 2nd Jan, 2026 is ₹0.60)
Number of shareholders as on 31st march of 2023,
2024 and 2025 are
861, 15390 & 140520 respectively.
Which further increased after 2nd rights issue as
per Sept quarter shareholding to 168129 shareholders (BSE link
for Shareholding pattern)
In the short term this rights issue provided positive
returns to applicants, however the price crashed below rights issue within few
weeks.
It clearly shows thousands and lakhs of investors end up
investing in unruly and unworthy companies and losing their investment value.
This is just one case of so many cases.
>Another story of Quasar India ltd coming out with rights issue of 48.81 Crores on 11th
Dec, 2024 (equity raise more than 6 times larger than existing equity value)
Within a year!! Application under IBC is filed against the
company.
(link
here)
Objects of the issue mentioned the use for working capital,
the same working capital they asked money (operational creditor) has now filed
application for liquidation under IBC for non-payment. This is clear
misappropriation and misutilization of public money.
Another
rights issue in 2024 Intention and extent of participation by our Promoters and
Promoter Group in the Issue: The Promoters of our Company vide their letters
dated, January 12, 2023 (the “Subscription Letters”) have undertaken to: (a)
subscribe, jointly and/ or severally to the full extent of their Rights
Entitlement and subscribe to the full extent of any Rights Entitlement that may
be renounced in their favour by any other Promoters of our Company; and (b)
only in the event of undersubscription, subject to market conditions, may
subscribe to, either individually or jointly and/ or severally with any other
Promoters for additional Rights Equity Shares in the Issue. Further, our
Company does not have a promoter group. Accordingly, in terms of the SEBI ICDR
Regulations, the requirement of minimum subscription in the Issue is not
applicable. Please note that our erstwhile Promoter, SEPC Limited vide its
letter dated September 24, 2022 had requested our Company for reclassification
from the promoter category to the public category, in view of its change in
management and control pursuant to restructuring of debts under the “Prudential
Framework for Resolution of Stressed Assets”. Our Company had made an
application dated November 30, 2022 to the Stock Exchanges under Regulation 31A
of the SEBI Listing Regulations seeking reclassification of SEPC to public
category. BSE Limited and National Stock Exchange of India Limited have vide
their letters dated June 28, 2023, each have approved the reclassification of
SEPC Limited from the promoter category to the public category. Therefore, as
of date of this Letter of Offer, SEPC Limited is not one of the Promoters of
our Company and will not be bound to subscribe to its Rights Entitlements, if
any in terms of its letter dated January 12, 2023 and Regulation 86 of the SEBI
ICDR Regulations.
https://orientgreenpower.com/files/Letter-of-Offer-Rights-Issue.pdf
ConversionConversion EmoticonEmoticon