On June 12, IND Renewable Energy shares rose 5% as investors cheered the firm’s rights issue strategy, taken up in the company’s upcoming board meeting.

At 9:57 am, the stock was trading at Rs 13.90, up 4.91% on the BSE.

A meeting of the company’s Board of Directors is programmed on June 14 to deliberate topics and shareholders’ approval for fundraising through the Right issue, IND Renewable Energy, mentioned in an exchange filing.

As per Section 62(1) of the Companies Act 2013, further issue of share capital by a firm is done if it offers to raise its subscribed capital by way of fresh issues of shares. Such shares should be primarily offered to prevailing shareholders at the offer date, the company’s holders of equity shares in proportion, by sending a letter of offer related to certain conditions.

Precisely, companies issue rights when they need cash for numerous purposes. When a company desires to raise more money and uphold the proportional voting power of its existing shareholders, it can do it by issuing rights shares.

A rights issue enjoys the existing shareholder’s preferential treatment by providing them with a right, not an obligation, to increase their stock acquaintance at a discount price. Witnessing more shares being issued to the market in a rights issue, the stock price seems weak and is probable to fall.