Penny stock Suzlon Energy announces a rights issue at a ratio of 5:21 at a 45% discount to its market price; should you participate?

The issue price is set at 5 rupees per share, a 45% discount to the last traded price on NSE.

From being an investor darling to becoming a penny stock, Suzlon Energy’s journey has been nothing short of a Bollywood drama as the stock plummeted from its four-digit peak to single digits!

Suzlon Energy is synonymous with renewable energy and has been a consistent contributor to India’s green energy journey. What began decades ago with their advocacy of climate change strategies and technologies has now become the mainstay of energy transition roadmaps around the world.

On Sunday, the company published the outcome of the meeting of the securities issuance committee of the company’s board of directors, in which the board decided to issue shares of the company by means of a right issued on the shares eligible shareholders of the Company.

What’s a good problem?

In a rights issue, a company raises money by issuing more shares, but only to existing shareholders.

The issue price is set at 5 rupees per share, a 45% discount to the last traded price on NSE. Out of Rs 5, the first installment of Rs 2.5 per share is payable on demand and Rs 2.5 is to be paid on subsequent calls.

Rights ratio: 5:21 (five participating shares with subscription rights for every twenty-one fully paid participating shares held by eligible shareholders of the Company, as of the record date which may be notified later). If the participation of any of the eligible shareholders is 5 (five) or more, these shareholders will be entitled to at least 1 (one) share of capital.

Interesting way, subscription rights are offered to shareholders in proportion to the number of shares held on this reporting date. A shareholder can refuse to subscribe to the capital increase and simply allow the “right” to expire. Alternatively, the shareholder can waive/exchange the right in favor of another person for a price.

The stock has gained 43.31% over the past year and over the past three years it has generated jaw-dropping returns of 193.55% which has made the stock a multi-bagger .

India is at a critical juncture on its path to a carbon neutral economy. India also occupies a central position on the global energy transition roadmap due to its enormous renewable energy potential, inherent manufacturing capabilities and ever-expanding domestic consumer base. Indian renewables across the board need to multiply every year to honor the Prime Minister’s pledge at COP26 to meet global climate goals.

India’s installed renewable energy capacity stood at 161 GW in June 2022, or 39.8% of the country’s total installed electricity capacity. Within renewable energies, the contribution of wind energy currently amounts to more than 25%.

Sallie R. Loera