Mahindra Lifespaces Developers, a leading realty firm, has finally got the consent of SEBI (Securities and Exchange Board Of India) for raising upto 300 crores rights issue. What is right issue working on is the principal of issuing shares to the existing shareholders at pre-decided price and ratio, as per their holding.
It was made mandatory for every firm to file draft papers with the capital markets regulator, SEBI, to launch any public offer. Hence, Mahindra Lifespaces Developers did the same to be able to raise funds through a rights issue for which SEBI has issued its observation now.
The revenue from the rights issue will be mainly used for the redemption of non-convertible debentures.
Apart from Mahindra Lifespaces Developers, three other firms – Intellect Design Arena, Vardhaman Special Steels, Zenotech Laboratories – have also filed the draft papers with SEBI for the approval to raise funds through the rights issue.
Market stability is assumed to be the reason for companies choosing for equity issuance to existing shareholders.
About Rights Issue?
For those who are not aware of what is rights issue – it is an issue of rights given to the existing shareholders of a company to buy additional shares from the company in proportion to their holding within a subscription period. This issue of rights is distributed by the company as a normal tax free dividend to all the shareholders in their formal records. They can be transferable also, allowing the shareholder of rights issue to sell them in the open market.