Stalwart Advisors

Rights Issue @ 220

Companies do rights issue to raise additional capital from existing shareholders by giving them an option to subscribe to new shares at a discount to current market price.

Assuming all shareholders opt for it, there is no dilution or change in shareholding of the company.

Hindware is raising Rs 250 Cr via rights issue in the ratio of 7:1 implying for every seven shares held in the company (as on 25th October), a shareholder is entitled to apply for one new share under rights issue at a price of Rs 220 per share versus prevailing market price of Rs ~300.

What should we do?
If you are under allocated to HSIL versus the intended allocation, it makes sense to apply for rights and acquire some shares at a discounted price.

Otherwise, one can sell their RE (rights entitlement) on the exchange. RE are traded on stock exchange just like regular shares.

The rights issue will remain open from 7th November to 22nd November.


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Exact weightage will depend on each subscriber’s risk appetite & comfort. However, as a thumb rule, any position size under 3% is little insignificant to move returns at portfolio level whereas beyond 10% it gets riskier from a concentration standpoint. Accordingly, low could indicate 3-4% weightage, medium 5-7% and high 8-10%.
Structural are those portfolio businesses where earnings are relatively stable (less volatility) and further are expected to rise in a steady fashion. Cyclicals are businesses which experience periods of upcycle followed by downcycle and have large variation in their reported earnings based on industry demand and supply. The mix between the two depends on available opportunities and respective valuation of the two pockets.