The main purpose of a rights Issue is to help a company raise capital by offering additional shares to its existing shareholders at a discounted price. It strengthens the company’s finances while giving shareholders the first opportunity to invest further.
- Fundraising for business growth – to finance expansion, new projects, technology upgrades, or acquisitions that support long-term development.
- Debt reduction – to repay or reduce existing borrowings, lowering interest costs and improving the company’s financial health.
- Strengthening the capital structure – to increase equity capital and reduce the debt-to-equity ratio, making the balance sheet stronger and more stable.
- Preserving shareholder control – to allow existing shareholders to maintain their proportional ownership and prevent dilution by new investors.
- Cost-effective fundraising – to raise capital faster and at a lower cost than public issues, loans, or private placements.
- Building shareholder confidence – to signal management’s commitment to growth and a stronger financial future, thereby boosting investor trust.
