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Formula sheet/NISM Series XV: Research Analyst/Corporate Actions
[ CORPORATE ACTIONS ]

Rights Issue: Theoretical Ex-Rights Price (TERP) & Value of Right

TERP=[(Nold×Pcum)+(Nnew×Pissue)]/(Nold+Nnew)TERP = [ (N_{\text{old}} \times P_{\text{cum}}) + (N_{\text{new}} \times P_{\text{issue}}) ] / (N_{\text{old}} + N_{\text{new}})
Value of Right Entitlement(Per Share)=Pcum−TERP=[Nnew×(Pcum−Pissue)]/(Nold+Nnew)\text{Value of Right Entitlement} (\text{Per Share}) = P_{\text{cum}} - TERP = [ N_{\text{new}} \times (P_{\text{cum}} - P_{\text{issue}}) ] / (N_{\text{old}} + N_{\text{new}})
Variables

NoldN_{\text{old}}: Existing shares held; NnewN_{\text{new}}: New rights shares entitled; PcumP_{\text{cum}}: Cum-rights market price; PissueP_{\text{issue}}: Rights offer price.

Exam note

Renunciation allows shareholders to sell their rights entitlement in the secondary market.

Worked examples
Rights Issue: TERP and Value of Right Entitlement

An investor holds 200 shares of Reliance Power trading at a cum-rights price of Rs 150. The company announces a 1-for-4 rights issue at a subscription price of Rs 100 per share. Calculate the Theoretical Ex-Rights Price (TERP) and the Value of Right Entitlement.

Bonus Issue, Stock Split & Share Consolidation Adjustments

An investor holds 600 shares of TCS with Face Value Rs 10 trading at Rs 3,600. Calculate post-action share count, face value, and theoretical price for: (a) 1:1 Bonus Issue, (b) 1:5 Stock Split, (c) 5:1 Share Consolidation.