M&M Financial approved the proposal to raise Rs.3500 crore via rights Issue of shares. The rights issue will be open from Jul-28 till Aug-11. The issue will comprise of 61.77 crore fully paid-up equity shares to raise an aggregate amount of Rs.3089 crore. The rights issue will be priced at Rs.50 per share, which will include a premium of Rs.48 per share.

One question that arises is why did M&M Financial set the rights price so much lower. One idea is that it is value accretive to the existing shareholders as they get the rights at a deep discount. This should improve the demand for these shares. The dilution is nearly going to be 100% of capital so half the price was understandable.