NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
Shares of Sundaram Textiles Ltd. closed at ₹600 cum-rights. The company offers a rights issue of 1 share for every 4 held at ₹400 per share. What is the theoretical ex-rights price per share?
The theoretical ex-rights price is ₹560. Four existing shares worth ₹2,400 plus one new share paid at ₹400 give a total value of ₹2,800 spread over five shares, which equals ₹560 per share.
- A₹560Correct
- B₹520
- C₹550
- D₹500
Explanation
For 4 shares held: value = 4 x 600 = 2,400. Add 1 new share at 400 = 2,800. Total shares = 5. TERP = 2,800 / 5 = ₹560. Using the simple average of 600 and 400 gives ₹500, which ignores the ratio.
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