What is the process and advantages if I buy the right issue shares in secondary market.
Do I need to pay twice , once in secondary market and also while applying in ASBA.
When you buy Rights Entitlement (RE’s) from market, you have to pay premium to purchase them after that you have to use these RE’s to apply for rights shares.
Yes, as mentioned above you have to pay premium when you purchase RE’s from secondary market and will have to also pay for rights shares when you apply.
Request to explain with one example
When you are purchasing Rights Entitlement (RE’s) from the secondary market you have to pay the shareholder who is selling them to you, so say you paid Rs. 50 for buying 1 RE share.
This RE you have purchased makes you eligible to apply for rights shares, when you apply for rights shares you have to pay the issue price, this is the price at which these shares will be allotted to you, so say this is Rs. 50 per share.
So your total cost of applying for rights shares will be Rs. 100 (Rs. 50 (the amount you paid to purchase RE) + Rs. 50 (the amount you paid while applying for rights shares)
Thank a lot
Why .more and more companies are coming up with REs ?
What is the catch?
Companies issue rights shares to raise funds to meet capital requirements for business purposes. You can refer to the Objectives of the Issue section in the Letter of Offer filed by the company to know more. You can download it from here.
Some companies come up with rights issue and some companies come up with OFS .
I know the difference between the both .
But I want to know what is catch between the both ?