Fifth year of zero SME rights issues likely after Rs 100 cr mop up in 2014

Year 2017 first with nil funds raised; experts say easier routes of raising capital such as QIP driving down popularity of rights

Smaller companies are no longer coming back to shareholders to raise additional money through rights issues.

The number of such issuances in the small and medium enterprise (SME) segment of stock exchanges is set to end at zero for the fifth year in a row, shows a Business Standard analysis of numbers from tracker Prime Database. A rights issue is when a company offers additional shares to existing investors at a discount to raise money. Companies in the SME segment had raised over Rs 100 crore through this route since 2014-the earliest since data is available. The peak was when, in 2019, Rs 91 crore were raised through two issues. This dropped to nil after 2017 (chart 1).

The SME segment continues to be otherwise vibrant with over 300 initial public offers (IPOs) after this time. The amount raised after 2017 through SME IPOs is also larger than it was before 2017 (chart 2).

An analysis of larger companies listed on the main board of the stock exchanges shows a similar trend on rights issues. Offers have dropped to a trickle, with only seven as of October 2022. Experts say easier routes of raising capital such as qualified institutional placements are the reason for the decline in popularity of rights issues. The total amount raised through rights issues on the main board is at its lowest since 2016 (chart 3).

Additional data as of mid-November shows two more companies have regulatory approval for rights issues. This includes Anjani Portland Cement and Capri Global Capital.

Both companies received approvals in October and are listed on the main board.