Piramal Pharma Rights Issue: Everything you need to know about Rights Issue

Piramal Pharma Ltd recently has offered 129,629,630 shares through a Rights Issue of ₹1050.00 Crores.

What are Rights Issues? Why do companies do Rights Issues? Why are they only available to existing shareholders? What should shareholders consider before exercising their Rights Entitlement? How to apply for Rights Issue?

This article will break this down for you.

What is a Rights Issue?

A rights issue is an offering of rights to the existing shareholders of a company that allows them to buy additional shares directly from the company at a discounted price rather than buying them on the secondary market. That is, if you own a share, you get the “right” to buy more shares – in a certain ratio, at a certain price. For example, a 10:1 issue means you get the right to buy ONE share for every TEN shares you own.

Why do companies do Rights Issues?

The rights issue is a fast and economical method of raising capital for the company. The company saves a significant amount of money on expenses such as underwriting fees, advertisement costs, and so on that it would have incurred in any other kind of fundraising. Secondly, regulators are less stringent because a current shareholder already knows a reasonable amount about the company.

What are Rights Entitlement?

This is relatively new concept in the Indian stock market, where the entitlement itself is traded on the exchange. Owning RE shares is not the same as owning rights shares. An shareholder needs to apply for rights shares based on entitlements received separately. RE is a temporary credit of shares in the Demat account, which allows the rights holders – who are not interested in adding more shares of the same company – to sell their RE shares in a trading window on exchanges to other willing investors for a price.

To get a better understanding of this. Let's consider the example of Piramal Pharma Ltd.

Piramal Pharma Ltd  has offered 120,629,630 shares through a right issue.

All shareholders holding 46 (Forty six) share of Piramal Pharma Ltd. as on record date: 2nd Aug 2023 would have received 5 (Five) Right Entitlements in their Demat a/c.

Details of the Right Issue:

Please Note: Any customer who has taken a Margin Position in Piramal Pharma Limited on or before August 1, 2023 and has that position open on or after August 3, 2023, will be eligible to get the Rights Entitlements in their demat account

How to deal with the Rights Entitlement received:

1. Shareholders may renounce the Rights Entitlements credited to their respective Demat accounts by trading/selling them from their Demat Holding by 23rd Aug 2022. Once sold, the money will be credited within T+1 days of such sale of shares.

OR

2. Apply for Rights issue by clicking below link

https://secure.icicidirect.com/trading/ipo/placeorder

OR

3. Apply for Rights issues by making an offline application

NOTE: Any Rights Entitlement which is neither renounced NOR applied for rights issues shall lapse.

Frequently Asked Questions (FAQs):

1. How do I obtain the details of my Right Entitlement?

One can obtain the details of their respective Rights Entitlements from the website of the Registrar (https://www.vccipl.com/RightsIssueDownload.html) by entering either their

• DP ID and Client ID or
•  Folio Number (in case of resident Eligible Equity Shareholders holding Equity Shares in physical form) and PAN.

2. How does ASBA work in Rights Issues?

In the case of ASBA facility, the investor agrees to block the entire amount payable on the Application with the submission of the Application Form at designated branches of SCSB (Self-Certified Syndicate Banks) by authorizing the Bank to block an amount in the Investor’s Account.

3. How do I get the list of designated branches of SCSBs for submitting the application form for Rights Issue?

The list of banks that have been notified by SEBI to act as SCSB for the ASBA  process is provided on https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=34

4. Can a investor make multiple Applications for Rights Issues?

Only one single Application Form shall be used by the Investors to make Applications for all Rights Entitlements available in a particular Demat account.

In the case of multiple Demat accounts, the Investors are required to submit a separate application form for each Demat account.

5. What is Right Issue Renunciation? How to opt out of Rights Entitlement?

This is the process of transfer of the right entitlements by the shareholders not willing to accept the right offer. The same can be sold online on stock exchanges just like selling any other stocks. The settlement of such transactions occurs on a T+2 rolling settlement basis. Following the purchase of the right entitlement, it is possible to apply for the rights issue.

NOTE: Any Rights Entitlement which is neither renounced NOR applied for rights issues shall lapse.