Suzlon Energy share price crashes 5% after rights issue announcement - check price, ratio

Suzlon Energy Rights Issue 2022, Suzlon Energy Share Price: Suzlon Energy share price on Monday crashed by more than 5 per cent to Rs 8.60 apiece on the NSE. The pressure was seen amid a heavy sell-off in the markets due to factors like negative global cues, RBI's upcoming monetary policy decision, Rupee weakness and more. During intraday trade, it crashed more than 7 per cent to touch the day's low of Rs 8.15.

Suzlon Energy share price slumped after the company announced that its board has approved a rights issue of 240 crore shares. On Sunday, the company's board had approved raising Rs 1,200 crore via a rights issue.

The company will raise funds through the issuance of 240 crore shares with a face value of Rs 2 each at an issue price of Rs 5 per share, the company said in a regulatory filing. The number of outstanding equity shares will increase from 1007,30,87,083 to 1247,30,87,083 after the issue (assuming full subscription).

Five rights equity shares will be issued for every 21 fully paid-up equity shares held by the eligible shareholders of the company. If the shareholding of any of the eligible equity shareholders is five or more, such shareholders will be entitled to at least one equity share, it added.

What Is Rights Issue?

Rights issue is one of the corporate actions. The purpose of rights issue is to raise capital from existing shareholders. When a company announces rights issue, it offers shares at a special price to its existing shareholders in proportion to their holding, thus more shares are issued to the market. 

The company invites existing shareholders to purchase new shares at a discount. This type of issue gives existing shareholders securities called rights. 

It is generally observed that when a company announces rights issue, the share price is diluted and goes down.