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NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions

A listed company issues new equity shares to its existing shareholders in the ratio of 1 share for every 4 held, at a price lower than the market price. Which corporate action is this?

This is a rights issue, because new shares are offered to existing shareholders in proportion to their holdings at a discounted price, and the company receives fresh capital. Bonus shares are issued free, buybacks retire shares, and splits only reduce face value.

  1. ARights issueCorrect
  2. BBonus issue
  3. CBuyback of shares
  4. DStock split

Explanation

A rights issue offers new shares to existing shareholders in proportion to their holdings, usually at a discount, and brings fresh money into the company. A bonus issue is free and raises no funds. A buyback reduces shares, and a split only changes face value.

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