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174 Corporate Finance BRILLIANT’S

7. Embedded option: An embedded op- 7. Eå~oS>oS> Am°ßeZ… EH$ Eå~oS>oS> Am°ßeZ EH$
tion is a component of a financial bond or other ’$m¶Z|{e¶b ~m§S> ¶m Aݶ {g³¶mo[aQ>r H$m EH$ KQ>H$ h¡
security, and usually provides the bondholder
VWm àm¶… ~m§S> hmoëS>a ¶m Bí¶yAa H$mo Aݶ nj Ho$ {dê$Õ
or the issuer the right to take some action
H$moB© E³eZ boZo H$m A{YH$ma àXmZ H$aVm h¡& Am°ße§g Ho$
against the other party. There are several types
of options that can be embedded into a bond. H$B© àH$ma h¢ {OÝh| EH$ ~m§S> ‘| Eå~oS>oS> {H$¶m Om gH$Vm h¡&
Some common types of bonds with embedded Eå~oS>oS> Am°ße§g dmbo ~m§S²>g Ho$ Hw$N> gm‘mݶ àH$mam| ‘|
options include callable bond, puttable bond, H$mbo~b ~m§S>, nwQ>o~b ~m§S>, H§$d{Q>©~b ~m§S>, E³gQ>|{S>~b
convertible bond, extendible bond, exchange- ~m§S>, E³gM|Oo~b ~m§S> VWm H¡$ßS> âbmoqQ>J aoQ> ZmoQ> gpå‘{bV
able bond, and capped floating rate note. A bond
may have several options embedded if they are h¢& EH$ ~m§S> ‘| H$B© Am°ße§g Eå~oS>oS> hmo gH$Vo h¢ ¶{X do
not mutually exclusive. nañna E³g³by{gd Zht h¢&
8. Rights issue: A rights issue or rights of- 8. amBQ²>g Bí¶y… EH$ amBQ²>g Bí¶y ¶m amBQ²>g Am°’$a
fer is a dividend of subscription rights to buy H§$nZr Ho$ {dÚ‘mZ {g³¶mo[aQ>r hmoëS>g© Ho$ {bE ~Zm¶o J¶o
additional securities in a company made to the EH$ H§$nZr ‘| A{V[a³V {g³¶mo[aQ>rO IarXZo Ho$ {bE
company's existing security holders. When the gpãñH«$ßeZ amBQ²>g H$m EH$ {S>{dS>|S> h¢& O~ amBQ²>g
rights are for equity securities, such as shares, B{³dQ>r {g³¶mo[aQ>rO O¡go {H$ EH$ n{ãbH$ H§$nZr ‘| eo¶g©
in a public company, it is a non-dilutive pro
Ho$ {bE hmoVo h¢ Vmo ¶h H¡${nQ>b àmá H$aZo H$m EH$ Zm°Z-
rata way to raise capital. Rights issues are typi- S>mBë¶y{Q>d ¶WmZwnmV h¡& amBQ²>g Bí¶y gm‘mݶV… EH$
cally sold via a prospectus or prospectus
àm°ñno³Q²>g ¶m àm°ñno³Q²>g gßbr‘|Q> Ûmam ~oMo OmVo h¢& Omar
supplement. With the issued rights, existing
security-holders have the privilege to buy a {H$¶o J¶o amBQ²>g Ho$ gmW {dÚ‘mZ {g³¶mo[aQ>r hmoëS>g© H$mo
EH$ gpãñH«$ßeZ Ad{Y Ho$ A§Xa EH$ {ZYm©[aV ‘yë¶ na
specified number of new securities from the
issuer at a specified price within a subscrip- Bí¶yAa go Z¶r {g³¶mo[aQ>rO H$s {ZYm©[aV g§»¶m IarXZo
tion period. In a public company, a rights issue H$m A{YH$ma hmoVm h¡& EH$ npãbH$ H§$nZr ‘| EH$ amBQ²>g
is a form of public offering (different from most Bí¶y npãbH$ Am°’$[a¨J H$m EH$ àH$ma h¡ (A{YH$m§e Aݶ
other types of public offering, where shares are npãbH$ Am°’$[a¨J go {^ÝZ hmoVm h¡, Ohm§ eo¶g© Am‘ OZVm
issued to the general public). H$mo Omar {H$¶o OmVo h¢)&

Distinction between Shares and Debentures
Base Share Debenture

1. Nature A share is a part of owned capital. A debenture is an acknowledgement
of debt.
2. Return Share holders are paid dividend on Debenture holders are paid interest on
shares held by them. debenture.
3. Rate The rate of dividend depends upon Interest on debenture is paid
the amount of divisible profit and at a fixed rate.
the policy of Board of Directors.
4. Voting Shareholders have voting right in Debenture holders do not have voting
Right Annual General meeting as a right except in specific circumstance,