Is It good to buy right issue shares?

In many cases, buying a rights issue can be a good opportunity — but it depends on the company’s financial health and your investment goals.

A rights issue has both advantages and disadvantages for shareholders.

It can be beneficial if you:

• Want to buy more shares at a discounted price, usually below the market rate.
• Believe in the company’s long-term growth and wish to maintain or increase your ownership.
• Prefer to resell your Rights Entitlement (RE) in the market for a profit if you don’t want to apply.

However, it can be disadvantageous if you:

• Are not confident about the company’s future performance or financial position.
• Expect the share price to fall after the rights issue.
• Think the earnings per share (EPS) may decline because of the increased number of shares.

In short, a rights issue is worth investing in when the company has strong fundamentals, a clear purpose for raising funds, and promoter participation — but it’s best avoided if it’s just a move to cover losses or repay old debts.