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Mahindra Finance vs Shriram Transport: Which rights issue should you choose?

Shriram Transport Finance has taken the traditional approach--money I need, offer a discount and set the ratio. In comparison, M&M Financial has priced the offer at a steep discount to market price

July 27, 2020 / 04:31 PM IST

Mahindra & Mahindra Financial Services, and Shriram Transport Finance--both leading non-banking finance companies - are in the market for funds to shore up their balance sheets battered by the COVID pandemic.

Both financiers have chosen to tap their existing shareholders through the rights offer route, while positioning it differently.

Shriram Transport Finance has taken the traditional approach--money I need, offer a discount and set the ratio. In comparison, M&M Financial has priced the offer at a steep discount to market price so that the issue sails through. What’s not so smart, is the company positioning it as a “reward” to shareholders.

Why? Because by definition, a reward is “a thing given in recognition of service, effort, or achievement”.  So asking people for money goes against the “giving” nature of a reward. Most importantly,  discounted or even free shares are never a reward, though most companies make it as seem as they though they are doing shareholders a favour.