Heritage Foods Ltd

Yes, absolute loss if you don’t subscribe (or sell off rights entitlements REs)! This is true for all rights issue. This issue is particularly devastating for the shareholders who are unaware of the rights issue complexity.

You have to wait for Rights Entitlements (with suffix “-RE”) to appear on your holdings. They appear after the rights issue opens (in this case, Jan 30, 2023). They will disappear after rights issue close (here, Feb 13, 2023). In the meantime, you have two options to avoid loss:

  • You can sell off the REs. REs can be traded just like the original shares. To avoid loss, you can calculate the fair price of the RE as Original Share market price - Rights issue price (in this case, as per last closing price, ₹186.85 - ₹5 = ₹181.85). But typically, REs are sold at a discount. Whoever buys REs can apply for the rights issue. You have to sell off before the rights issue close date.
  • Or you can apply for the rights issue. Easiest way to subscribe to the rights issue is through your bank ASBA. After REs appear on your holdings, you may apply. Currently, there is no way to apply for rights issue through your brokerage account.
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Thanks, This is really helpful information!
I think it makes sense to apply for rights issue.
Company is doing decent. Promoters are growth oriented, fmcg type business albeit lower margins, promoters participation in rights as they might be looking to increase shareholding through subscribing, comfortable valuation

Suppose I own 1000 shares. Can I apply for more than 1000 shares , let’s say 2000 shares in this rights issue?
if some rights shares are unsubscribed, I will get it correct?

There are two ways in which you can get the Rights Entitlement:

  1. Your own REs will be credited to you from Monday. So if you own 1000 shares, you will get 1000 REs automatically. The Price for this will be the Rights Issue price.

  2. There will be a limited window for RE trading. Those who don’t want to exercise their REs sell it instead in the open market. These REs have their own ISIN code and trade as a separate security on the exchanges (I assume Heritage Foods will share this detail when the time comes). You can buy additional REs here if you want. But these will likely trade closer to the CMP.

Once you have all the REs (Ones you are automatically entitled to + Ones you purchase from open market), you can convert them to Shares via Internet Banking. The Zerodha link above has more details on this.

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Yes that’s correct. The unsubscribed portion is alloted to all the shareholders who have applied for more than 1x shares.
Please refer my message just before the one you have replied on.

Did anyone go through the offer letter?

The Lead Manager, Chartered Finance Management, has copied the template from one of their old Rights Issue I guess (Suditi).

  1. In a couple of places, I noticed that the hyperlinks say Heritage, but redirect to Suditi website (Ex: Page 268).

  2. In couple of other places, the text says KFintech, but redirects to some other website (Ex: Page 274)

  3. Elsewhere, I saw that the Issue Closing Date is mentioned as September 2022, which was the Issue Closure for Suditi.

This reflects very poorly on both Heritage Foods and the Lead Manager.

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Infact on receiving the letter of offer from Kfin technologies,the link for downloading the application form is not working. Infact it seems the whole exercise seems be to designed in a way that maximum number of retailers loose their rights entitlements for one reason or another. Reflects very poorly on management . Now it has become straight as an arrow for me—to stay out of companies where a little bit of political connection is there. They may not be doing any thing but the management’s mind is political( siaysi dimaag as they say in Hindi)

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