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Are promoters using rights issue to increase their stake in the company?

Posted On: 2020-08-30 09:05:44


A deluge of rights issues raised money from the market in the recent past. The relaxation of some rules by SEBI in raising funds made promoters to quickly realize an option to raise their stake in the company and have a war chest built to be ready for operations post the Covid19 pandemic related shutdown. We will look at a few rights issues to prove our observation.

Name of the companyPre Rights Issue StakePost Rights Issue StakeChange
Aditya Birla Fashion Retail Ltd59.07%59.79%+0.72%
Arvind Fashions Limited35.58%39.74%+4.16%
PVR Limited18.56%18.79%+0.23%
Refex Industries Limited34.51%49.72%+15.21%
Shriram Transport Finance Company Limited26.25%26.48%+0.23%

The promoter of Aditya Birla Fashion Retail Ltd (ABFRL) have increased their stake from 59.07% to 59.79%. The promoters got 5,95,93,649 equity shares through the rights issue. The company issued partly paid shares through a rights issue in the ratio of 9 shares for 77 shares held. The shares were offered at Rs. 110 (Face Value: Rs. 10 and Premium: Rs. 100) out of which Rs. 55 per share was paid on application and the balance at a later date. The partly paid up shares are listed in the stock exchanges.

The Promoters and Promoter Group of Arvind Fashions Limited ("Company"), were allotted 1,83,28,507 Equity Shares pursuant to the rights issue of the company, taking the overall voting rights and shareholding from 35.58% to 39.74% of the total paid up share capital of the Company. The company issued shares through a rights issue in the ratio of 62 shares for 91 shares held by existing shareholders. The shares were offered at Rs. 100 (Face Value: Rs. 4 and Premium: Rs. 96) on application.

The Promoters of Shriram Transport Finance Company Limited ("Company"), increased the stake in the company from 26.25% to 26.48% of the total paid up share capital of the Company through the rights issue. The company issued shares through a rights issue in the ratio of 3 shares for 26 shares held by existing shareholders on the record date. The shares were offered at Rs. 570 (Face Value: Rs. 10 and Premium: Rs. 560) on application.

The promoters of PVR Ltd increased their stake to 18.79% from 18.56% as of June 30, 2020. The company raised funds of Rs. 29979.16 lakhs through rights issue of 38,23,872 equity shares at a price of Rs. 784 per equity share (Face Value: Rs. 10 and Premium: Rs. 774) in the ratio of 7 equity shares for every 94 equity shares held by the eligible equity shareholders of the company on the record date.

The promoters of Refex Industries Ltd increased their stake from 34.51% as of June 30, 2020 to 49.72% through the recently concluded rights issue. The company had offered 5,526,848 equity shares face value of Rs. 10/- each at a price of Rs. 45 per equity share (Face Value: Rs. 10 and Premium: Rs. 35) in the ratio of 5 equity shares for every 14 equity shares held by shareholders of the company on the record date. The promoters lapped up 5,102,322 equity shares or 92.31% of the rights issue that was on offer.


Source: Equity Bulls

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