Shares of IND Renewable Energy shot up 5 percent on June 12 as investors cheered the company's rights issue plan, which will be taken up in the company's next board meeting.
At 9:57am, the stock was quoting at Rs 13.90, up 4.91 percent on the BSE.
A meeting of Board of Directors of the company is scheduled on June 14 to, inter-alia, consider subject to approval of shareholder raising of funds through issue of shares on Rights basis, IND Renewable Energy said in an exchange filing.
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Section 62(1) of the Companies Act, 2013 provides for further issue of share capital by a company, if it proposes to increase its subscribed capital by way of fresh issue of shares. Such shares should first be offered to existing shareholders at the date of the offer, are holders of equity shares of the company in proportion, by sending a letter of offer subject to certain conditions.
In simple terms, corporations issue rights when they need cash for various purposes. When a company wants to raise more money and maintain the proportional voting power of its current shareholders, it can do so by issuing rights shares.
A rights issue gives the existing shareholders preferential treatment by giving them a right, and not an obligation, to increase their exposure to the stock at a discount price. Considering more shares are issued to the market in a rights issue, the stock price is diluted and is likely to fall.
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