NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
Shares of Sundaram Textiles closed at ₹600 cum-rights. The company offers a rights issue of 1 share for every 3 held at ₹300 per share. What is the theoretical ex-rights price per share?
The theoretical ex-rights price is ₹525. Three shares at ₹600 are worth ₹1,800; adding one new share at ₹300 gives ₹2,100 spread over four shares, which is ₹525 per share.
- A₹525Correct
- B₹450
- C₹500
- D₹550
Explanation
For 3 existing shares worth 3 x 600 = ₹1,800, one new share is issued for ₹300, giving total value ₹2,100 across 4 shares. Ex-rights price = 2,100 / 4 = ₹525. Check: 450 would result from averaging 600 and 300 equally, ignoring the 3:1 weights.
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