Indian companies raise Rs31,000 crore via rights issue in 2008

11 April 2009

During the calendar year 2008, corporate India collected funds amounting to Rs31,069 crore through rights issue, up two-fold over the last year's figure of Rs14,085 crore, as per data compiled by brokerage firm SMC Capital.

Rights issue is an invitation to the existing shareholders for purchasing shares of the company.

''With near frozen debt market and drying up of initial public offers (IPOs), firms tried their luck with rights issue, as they were in need for funds to meet their expansion costs,'' SMC Capital equity head Jagannadham Thunuguntla said.

Some of the big ticket rights issue that hit the markets in 2008 include Tata Motors' over Rs4,000 crore issue to fund acquisition of British brand Jagaur Land Rover (JLR) and Rs5,000 crore Hindalco rights issue.

In 2008 February, SBI hit the market with a Rs16,000 crore rights issue, which was fully subscribed, despite the turmoil in global financial markets and a fall in its share price. (See: SBI's over Rs16,000 crore rights issue fully subscribed).

''The two big issues of last year saw lukewarm response from investors with the remaining being subscribed by the promoters. It acts as an advantage for the companies, as the promoters fill in the remaining gap and there is no dampening effect on the prestige of the firm,'' Thunuguntla added.