“This is a big-time success. Earlier, investors used to go to the grey market to buy entitlement. This has formalised the process. It will encourage more companies to go for a rights issue
for additional funding,” said Deven Choksey, strategist at KRChoksey Investment Managers.
Sebi introduced the concept of trading in rights entitlement in January. Under the new system, the dematerialised accounts of eligible shareholders gets credited with a new international securities identification number or ISIN, which will act as a separate security and can be traded on the exchange platform. Entities opt for the qualified institutional placement route for its quick turnaround time.
Choksey said the cost of raising funds through a rights issue
is less than most other means. The cost benefit, coupled with regulatory changes, will prompt more firms to look at rights issuances, he said. Experts said it remains to be seen if the RE trading platform is as successful in case of small or mid-sized entities.