What is a Rights Issue in the Stock Market?

A rights issue allows an existing company’s shareholders to purchase additional shares, generally in a specified proportion and at a price determined under the issue terms. Usually, a company’s launch a rights issue to raise additional equity capital from existing shareholders.

For example, 

• In a 1:4 rights issue, an eligible shareholder may be offered one additional share for every four shares already held, subject to the issue conditions.

Rights Issue vs Bonus Share in India

A rights issue can bring new capital into the company, whereas a bonus issue primarily changes the number of shares held by eligible shareholders. Additionally, unlike a bonus issue, the shareholder generally has to pay for the shares subscribed under a rights issue. 

For more clarity, let’s understand the comparison in detail:

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