Advantages to the investors, Financial Management

Advantages to the Investors:

  1. The warrant acts as a sweetener and ensures a better subscription to the NCDs, especially for companies with good track record. NCDs with warrant option may also be offered to the investors with offer for buy-back, so that the investors are required to retain only the equity warrant and are not required to retain the NCD.
  2. NCD with warrant is preferred by many investors because they can expect steady rate of return and capital appreciation on the NCD and can also obtain capital appreciation by subscribing to the equity shares on exercise of the warrant option.
  3. Warrants confer a high degree of leverage to the investor. The investor has the option to sell the warrant in the market, subscribe to equity shares by surrendering the warrant and paying the exercise price or allowing the warrant to lapse.
  4. Warrants are listed and are traded independently on the stock exchanges. The investor has the option to dispose off the warrant before the right to allotment of equity shares becomes exercisable. However, in practice, warrants have very limited liquidity in India.
  5. The investor limits his downside risk to the amount paid for the warrants, but the upside potential of capital appreciation in the event of favorable price movements is large.
  6. Warrants are highly geared instruments with tremendous potential for capital appreciation and are attractive speculative tools for investors.

 

Posted Date: 9/10/2012 8:03:30 AM | Location : United States







Related Discussions:- Advantages to the investors, Assignment Help, Ask Question on Advantages to the investors, Get Answer, Expert's Help, Advantages to the investors Discussions

Write discussion on Advantages to the investors
Your posts are moderated
Related Questions
Bonds pay interest periodically at a pre-specified rate of interest. The annual rate at which this interest is paid is known as the coupon rate or simply the coup

discuss the applicability of an operating cycle of a vegetable growing business

Q. What are the Benefits of Holding Inventories? (1) Timing of Demand and Supply: - Requirement to hold inventory of raw materials arises because it isn't possible for a firm

Net Present Value (NPV) In corporate finance, the current value (the value of cash to be received in the future expressed in today's dollars) of an investment in excess of the

Q. Explain about Cash Forecasting Method ? Under this method an approximate is made of cash receipts and payments for the next period. Estimated cash receipts are added to the

What are the disadvantages and advantages of Foreign direct investment (FDI) like opposed to a licensing agreement with a foreign partner? Answer:  The major advantage of FDI (

It is an accounting term which refers to the balance sheet item that accounts for dividends that have been confirmed but not yet given to shareholders. Accrued dividends are taken

Floria Scarpia believes that many of her clients could benefits from using international investments to diversify their portfolios but many are reluctant to invest abroad -especial

Maturity Profile Even though there is no ideal theory/concept of the maturity of the instruments, some important issues that should be considered while balancing the long-term

What are some of the factors that common stockholders consider when deciding how much, if any, cash dividends they desire from the corporation in which they have invested? Gene