Yes, absolute loss if you don’t subscribe (or sell off rights entitlements REs)! This is true for all rights issue. This issue is particularly devastating for the shareholders who are unaware of the rights issue complexity.
You have to wait for Rights Entitlements (with suffix “-RE”) to appear on your holdings. They appear after the rights issue opens (in this case, Jan 30, 2023). They will disappear after rights issue close (here, Feb 13, 2023). In the meantime, you have two options to avoid loss:
- You can sell off the REs. REs can be traded just like the original shares. To avoid loss, you can calculate the fair price of the RE as Original Share market price – Rights issue price (in this case, as per last closing price, ₹186.85 – ₹5 = ₹181.85). But typically, REs are sold at a discount. Whoever buys REs can apply for the rights issue. You have to sell off before the rights issue close date.
- Or you can apply for the rights issue. Easiest way to subscribe to the rights issue is through your bank ASBA. After REs appear on your holdings, you may apply. Currently, there is no way to apply for rights issue through your brokerage account.
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