One of the most common ways for Indian companies to raise funds is through a rights issue. Using this mode, the company makes an offer to existing shareholders to purchase additional shares at a discounted price (rights offer price) within a specified time frame. A rights issue, unlike an IPO, is only available to existing shareholders in proportion to their existing holdings. Rights entitlements are shares offered to eligible shareholders in proportion to their existing holdings as of the company’s record date. A company could use the funds to pay off debt, acquire assets, or facilitate expansion without having to take out a bank loan.
RHP and DRHP
The DRHP is a publicly available document which is filed with the Securities and Exchange Board of India (SEBI). This document is made to communicate with potential investors by demonstrating current status of the business, risk involved, and providing investors with enough information for them to decide whether they want to invest in the company or not. It does not, however, include any information about the number and price of shares being offered, as well as the size of the issuance. Red Herring Prospectus (RHP) is the final prospectus and includes additional info then the DRHP. It includes details such as the IPO dates, prices as well as up-to-date financial data. SEBI has ordered all companies planning an IPO to share specific information about their operations, finances, risks, and so on.
Reversals are large price changes in which the trend changes direction. Pullbacks and consolidations are small counter-moves against the trend. A reversal continues and forms a new trend, whereas a pullback ends and the price returns to the trending direction. Reversals can be positive or negative, for example, when an upward trend loses momentum and the price of an asset begins to fall. They can occur frequently and quickly in intraday trading, but they can also occur over days, weeks, and years. The timing of reversals is critical. Reversals can be difficult to predict and distinguish from short-term pullbacks, or so-called “noise.” Potential pullbacks always precede reversals. A reversal denotes a change in the price trend of an asset, whereas a pullback is a shorter-term counter-movement within an existing trend. The challenge is determining whether it is merely a pullback or a genuine price reversal. It is the inverse of a continuation, which occurs when the price of an asset continues to move in the same direction.