UPL The company sold a stake in Advanta seeds to raise 350mil. Also announced a Rights issue to raise another 400mil. Record date is 26Nov. Rights issue opens on 5Dec and closes on 17Dec. Shareholders can sell their Rights between 5 and 11 Dec.Eligible shareholders are those held by Public (64%) => 48Cr shares out of 75Cr total. Rights issue will add about 9.383Cr shares which is about 20% of 48Cr shares. The CMP has been moving up and currently is at 575. Look at the table below to see how Rights issue affects the share price. Let's say Y = Cost per share after Rights. Since the Rights is 1 share for every 8 shares held, the equation is: Y = (8*CMP+360)/9
Discount is CMP-₹360. Rights Profit is for those who sell off their Rights.
CMP Y Gain Gain% Discount Rights Profit
500 484 16 3.20% 140 28.00%
525 507 18 3.20% 165 28.00%
550 529 21 3.20% 190 28.00%
575 551 24 3.20% 215 28.00%
600 573 27 3.20% 240 28.00%
625 596 29 3.20% 265 28.00%
Now does 3.2% sound like a terrific advantage to buy the share to get Rights issue?
Or does 28% sound better for a short term investment in Rights? This certainly implies that much of the Rights issue will be sold in the period between 5 and 11 Dec. That's 9.383cr shares to sell. Sounds like a Xmas gift to FIIs and DIIs who are holding the shares anyway for long term to book a short term 28% profit on 13% additional investment to buy Rights.
"I feel it's a good bet to buy some UPL puts :)"
