Analysis of Right, Bonus, and Public Issues: A Comparative Study

This assignment provides a detailed comparison of right, bonus, and public issues. It explains right issues as offerings to existing shareholders at a discounted price, bonus issues as free shares to current shareholders, and public issues as offerings to new investors, including Initial Public Offerings (IPOs) and Follow-on Public Offerings (FPOs). The analysis highlights the differences in how these issues impact company capital, shareholder rights, and the overall stock market. The assignment covers the key aspects of each type of issue, including the mechanics of issuing shares, the benefits and implications for both companies and investors, and how these issues are used in corporate finance strategies. Furthermore, the assignment refers to the sources like CFA Institute and Chittorgarh Infotech Private Limited to support the arguments.

QUESTIONS
Define the right issue and bonus issue. How these
issues are different from the public issue?
ANSWER:
Right issue are the share which are issued by the company in order to increase the subscribed share
capital of the company through the additional issue of shares.
1. Through notices issued to every shareholder these shares are issued to each and every
existing shareholders of the company (. CFA Institute , 2019)
2. It offers the existing shareholder to buy the shares at the discounted price within the
prescribed time period.
3. The shareholders of the company are also required to confirm on the number of shares they
want to opt for within the prescribed available time frame. (. CFA Institute , 2019)
4. These right also can be cancelled by the company enabling only to issue shares to selected
group of people or investors on a preference mode through a special resolution.
Bonus issue are shares which are issued to the existing shareholders of the company as a gift to
them depending on the number of shares held by each of the shareholders.
1. These shares are issued to the shareholders of the company at free of cost without any cost
involved to them. For example, it can be issued in the proportion of 4:1 it means that for
every four shares held by the shareholder of the company, one bonus share to be allotted to
that particular shareholder. (. CFA Institute , 2019)
2. Issue of Bonus shares does not bring in additional fresh capital into the company since the
shares are issued to the existing shareholder without any amount received from them.
Through issue of bonus shares the net worth of the company also remains unchanged.
3. Through the company following reserve, such reserve can be issued from any of the
accounts:
 Free Reserves
 Capital Redemption Reserves Account
 Securities Premium Account (. CFA Institute , 2019)
How these Bonus and Right issue are different from the
public issue?
Answer:
When an issue is made totally to the new investors of the company so that they can become part of
the shareholder’s family, such issue is called public issue .This issue is totally different from Bonus

and Right issue of shares. (Chittorgarh Infotech Private Limited, 2018)The Public issue of shares can
be further classified into two broad categories:
1. Initial Public Offer(IPO):When an unlisted entity makes issue of its existing shares or issue
fresh shares to the public for the first time it is known to be Initial Public Offering made by
the company to the public in large .This also make a road for the company shares to be listed
on the stock exchange .Trading can be easily done on such shares by the public. (Chittorgarh
Infotech Private Limited, 2018)
2. Follow on Public Offer: When the company which is already listed on the stock exchange
offers a fresh shares to the public in general it is called as a Follow on Public Offer(FPO).
(Chittorgarh Infotech Private Limited, 2018)
References
. CFA Institute , 2019. Right Issue vs Bonus Issue. [Online]
Available at: https://www.wallstreetmojo.com/right-issue-vs-bonus-issue/
[Accessed 15 May 2019].
Chittorgarh Infotech Private Limited, 2018. What is the difference between Public Issue,Right
Issue ,Bonus Issue and Private Placement. [Online]
Available at: https://www.chittorgarh.com/faq/difference-public-right-bonus-issue-pvt-placement/
488/
[Accessed 15 May 2019].