In a unique move, Hindalco Industries, which is coming out with a rights issue next month, has got half the issue underwritten. So what does it mean? Well, in case the issue is not fully subscribed, the banks undertake to buy the unsubscribed shares.This is quite rare, and I’ve not come across a rights issue being underwritten as in most cases, the promoter group buys the unsubscribed portion of the issue. Citibank India, Deutsche Bank, DSP Merrill Lynch, SBI Cap and The Royal Bank of Scotland are the banks involved.

Promoters hold a 31% stake and it is almost certain they will subscribe according to their eligibility. Insurance companies account for close to 10.5% and they are also certain to subscribe. With 50% of the issue being underwritten, there should be no problems for the issue to sail through.

But are retail investors actually keen to buy? Aah, now that remains to be seen! :)

Related Posts: