Tata Consumer Products rights issue

Tata Consumer Products Rights Issue: Key Details and Implications

On July 23, Tata Consumer Products Ltd. announced the details of its upcoming rights issue, aiming to raise up to ₹3,000 crore. This strategic move is set to offer existing shareholders an opportunity to purchase additional shares at a significant discount, thereby raising capital to fund future growth and acquisitions.

Rights Issue Details

Approved by the Board

The rights issue was approved by the board of Tata Consumer Products in January 2024. The company plans to issue 3.66 crore rights equity shares, aggregating to ₹2,997.77 crore.

Pricing and Entitlement

• Price per Rights Share: ₹818, which represents a 35% discount to Tata Consumer Products’ closing price on July 23.
• Entitlement Ratio: Existing shareholders will be eligible to receive one rights equity share for every 26 shares they hold as of the record date.

Shareholder Entitlement

• Less than 26 Shares: Shareholders holding less than 26 shares will have zero rights entitlement in the issue. However, they can apply for additional rights equity shares and will be given preference in the allotment of one additional rights equity share in case of an application. Note that these shareholders cannot renounce these shares to third parties.

  

Key Dates

• Record Date: July 27, 2024 (Saturday)
• Issue Opening Date: August 5, 2024
• Issue Closing Date: August 19, 2024

Participation and Renunciations

On-Market Renunciations

On-market renunciations can be conducted from August 5 to August 12, 2024. This allows shareholders to renounce their rights on the exchanges at a potentially better price, generally done 3-4 working days before the issue closes.

Off-Market Renunciations

Off-market renunciations involve a mutual agreement on price between the buyer and seller, completed off-market. This can be done until the issue closes, provided the buying investor has enough time to apply for the rights issue.

Recent Acquisitions and Market Performance

Earlier this year, Tata Consumer Products announced the acquisition of a 100% stake in Capital Foods, known for brands like Ching’s Secret and Smith & Jones, for ₹5,100 crore. Additionally, the company acquired Organic India for ₹1,900 crore, marking its entry into the health and wellness category.

Market Reaction

Shares of Tata Consumer Products fell 2.64% to ₹1,223 following the announcement, despite a 4.5% rise on Tuesday. The stock has gained 15% so far in 2024.

Understanding Rights Issues

A rights issue is a method by which a company raises funds by offering additional shares to its existing shareholders. Shareholders who do not own shares as of the record date are not eligible to participate in the rights issue.

Conclusion

Tata Consumer Products’ rights issue presents a strategic opportunity for existing shareholders to invest further in the company at a discounted rate. With significant recent acquisitions and a strong market presence, this rights issue is poised to support Tata Consumer Products’ continued growth and expansion in the competitive market. Stay informed about the key dates and participation methods to make the most of this financial event.

FAQS:

1. What is a rights issue?

A rights issue is a method by which a company raises additional capital by offering its existing shareholders the right to purchase additional shares at a discounted price. This allows the company to raise funds while giving current shareholders an opportunity to increase their investment at a lower cost.

2. What are the key details of the Tata Consumer Products rights issue?

• Total Amount to be Raised: Up to ₹3,000 crore.
• Number of Rights Equity Shares: 3.66 crore shares.
• Price per Rights Share: ₹818, representing a 35% discount to the closing price on July 23.
• Entitlement Ratio: One rights equity share for every 26 shares held as of the record date (July 27, 2024).

3. How does the entitlement ratio work?

The entitlement ratio determines how many rights equity shares a shareholder can purchase based on their current holdings. For Tata Consumer Products, shareholders will receive one rights equity share for every 26 shares they hold as of the record date.

4. What happens if I hold less than 26 shares?

Shareholders holding less than 26 shares will have zero rights entitlement in the issue. However, they can apply for additional rights equity shares and will be given preference in the allotment of one additional rights equity share in case of an application. Note that these shareholders cannot renounce these shares to third parties.

5. What are the important dates for the rights issue?

• Record Date: July 27, 2024
• Issue Opening Date: August 5, 2024
• Issue Closing Date: August 19, 2024

6. What are on-market and off-market renunciations?

• On-Market Renunciations: Shareholders can sell their rights on the stock exchanges from August 5 to August 12, 2024, potentially at a better price.
• Off-Market Renunciations: Shareholders can transfer their rights through a mutual agreement off-market until the issue closes, provided the buying investor has enough time to apply for the rights issue.

7. What recent acquisitions has Tata Consumer Products made?

Tata Consumer Products recently acquired:

• Capital Foods: Known for brands like Ching’s Secret and Smith & Jones, for ₹5,100 crore.
• Organic India: For ₹1,900 crore, marking its entry into the health and wellness category.

8. How did the market react to the rights issue announcement?

Shares of Tata Consumer Products fell 2.64% to ₹1,223 following the announcement, despite a 4.5% rise on Tuesday. The stock has gained 15% so far in 2024.

9. Who is eligible to participate in the rights issue?

Only shareholders who own shares as of the record date (July 27, 2024) are eligible to participate in the rights issue. New investors or those who acquire shares after this date will not be entitled to the rights shares.

10. What should shareholders consider before participating in the rights issue?

Shareholders should consider:

• The discounted price of the rights shares: ₹818 per share.
• Their current shareholding and entitlement.
• The company’s recent performance and growth prospects.
• The key dates for participation.
• The potential for on-market or off-market renunciations if they choose not to participate.

Tata Consumer Products rights issue

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