In the past, we have had very good experiences with Rights issue offerings of the company.
For instance Veljan Denison proved to be a very good case with approximately 20% return in 3 months while Atul Auto was over the top with more than 250% return.
We like the cases wherein:
- The equity dilution is less (For instance 1:10 i.e. one share for every 10 shares)
- The valuations are reasonable
- Relatively large public holding (enables subscription in excess of entitlement)
- A decent discount to the prevailing stock price before the record date
Bhushan Steel Ltd in its announcement to exchanges has announced that Board of Directors have approved:
To create, offer and issue to the existing shareholders of the company 1,41,57,220 equity shares of face value of Rs. 2 each in the ratio of 1:15, i.e., one equity share for every 15 equity shares of the company held as on the record date at a price of Rs. 335/- per equity share.
Bhushan Steel is currently trading at around Rs 400/- per share. We like the fact that dilution would be very less and also the discount to the current price is decent at 16%.
Now before you jump the guns and start buying, the Rights issue is still some time away and therefore it would not be prudent of one to start buying the shares of Bhushan Steel at the moment (unless purely from investment perspective). There are still some regulatory approvals pending and the company is yet to announce the record date.
As far as our members are concerned, we will surely keep Alpha Plus members updated about the same and recommend the investment strategy (based on regulatory proceedings) at the right time.