Vodafone Idea's Rs 25,000 crore rights issue opens. Is it worth your money?

Vodafone Idea’s Rs 25,000 crore rights issue opened on Wednesday. The country's largest telecom firm is offering 2,000 crore shares at a price of Rs 12.50 apiece. The entitlement ratio of the issue, which will close on April 24, has been fixed at 87 rights shares for every 38 currently held by shareholders. On Tuesday, the stock settled at Rs 16.90 apiece on BSE.

By definition, a rights issue is an invitation to the existing shareholders of the company to buy additional shares at a discounted price in proportion to their holding of old shares. In this offering, the companies grant shareholders the right, but not the obligation, to buy new shares at a discount to the current market price.

The Promoter shareholders, Vodafone Group and Aditya Birla Group have confirmed their participation of up to Rs 11,000 crore and up to Rs 7,250 crore, respectively in the rights issue, the company said in its press release.

Most analysts advise existing shareholders to subscribe to the rights issue, as they feel it is attractively priced. That apart, things may be slowly turning for the sector and the issue provides a good opportunity to those who wish to stay in the sector for the long term.