Need advice on rights issue - Suzlon

sir,

Im a beginner, unfortunately started with suzlon. Before announcing rights issue, i bought 165 shares @58 Rs.

I want to know, will this rights issue beneficial to me? or shoudl i sell it now? when will be the additional stocks added to my a/c.

tnx in advance.


- idhayan

Good question.. let me throw some calculation behind it..

ratio of rights issues 2 for 15
Current mkt price = 58.

Say if you have 150 stocks at 58 rs.. Then you will be offered right to buy additional 20 stocks at 63 rs. It is your choice, whether u excercise that right or not. Suppose you use that right then u have so shell out extra money to buy 20 new shares.

1) 150*58 = 8700 Rs
2) 20*63 =1260 Rs.
i.e. 170 stocsk costing 9960rs giving per share price of 58.6.

This will be the price where suzlon will get traded after the rights issue. Thats where exactly it is currently traded. So I don't understand why should one thru Rights route rather then directly buying them from secondary mkt.

Quite possible, if mkt falls, then I might be able to buy these extra 20 stocks below 58 rs of price and prove that I am smarter then suzlon mgmt and not getting into their trap of "Rights Issue".

Rights issue is approach by which company is raising additional money thru existing shareholders.

Assuming that I am interested in investing in Suzlon (or ready to increase my exposure to suzlon).

Hope this helps.
Happy Trading

Hi Idhayan ,

Good that you bought Suzlon @ 58 there are lot many people who are stuck at very high price.
Now coming to the Right issue. It will not get credited to your a/c by default. Right Issue gives you right to by a company share at a given price and at a given ratio.Here price is 63, much higher than the market price., and ratio is (2:15, means you can buy 165/15 *2 =22 shares) , So Retail investor (like you , me) will not buy these shares(because price is higher than CMP) and then company will have option to sell these shares at 63 to any Institutional investor .
Only positive thing(ONLY) I see that they will get some money to buy some more time and might come on track. There is some rumour (read on money control) that they have multi billion $ orders in pipeline. So It could be the reason why promoter might want to increase their stake in the company or any smart Institutional investor would like to buy.
Moral of the story is that that downside is limited and upside could be good in short term and long term(2-3 years) . So if you can wait , wait for some time .

Tons of tnx to AW10 & rajeabc,

I thought 2:15 rights issue is like alloting additional shares to the retail investors. After your messeges, im ready to sell @ 58.

Tnx

avoid

avoid the rights issue at all cost. this is nothing but a gimmick by the management. management knows too well that no sane investor will subscribe this rights issue at this price. so they are trying to boost up the sagging share price. this is a cheap marketing by the management. instead they should focus on core competency. :annoyed:

Usually (mostly) right issue is offered at discount price than the prevailing to market price, tempting the existing shareholders. I recall , in 2007 Tata Steel had offered right at Rs.300-00 when the market price was around 850-00.

It is surprising why Suzlon is offering rights at higher price than the prevailing market price.

Heard a big shot wants part in the company or the company wants to increase its share holding to have more power to take tougher decision as they facing lot of debt issue and price of Oil not going to go high soon so wont help the company....

Since its obvious no one will pay more for a stuff available cheap...One of this Thought book will win in background

the stock recently got a beating due to its quarterly results. It seems to test its support around 51. Any advice if I have to hold on to this stock or sell it....