NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market
Neha Kulkarni has bought shares in a rights issue made to existing shareholders only. In which category does such an issue fall?
A rights issue is a further issue of new shares offered to existing shareholders in proportion to their holdings. It raises fresh capital for the company, so it is a primary market activity, but it is neither an IPO to the public nor a buyback.
- AFurther issue of capital to existing shareholders in the primary marketCorrect
- BSecondary market trade on the exchange
- CInitial public offer to the general public
- DBuyback of shares by the company
Explanation
A rights issue offers new shares to existing shareholders in proportion to their holding, raising fresh capital for the company. It is a primary market activity but is not an IPO, because the company is already listed, and it is not a buyback, which reduces capital.
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