A rights issue is for raising fresh capital. The company, instead of going public, approaches its shareholders’ with an option to subscribe to it in proportion of their shareholding. It’s like an IPO for a selected group. A 1:4 rights issue means for every 4 shares held, the shareholder can subscribe to 1 additional share.
But unlike bonus it comes at a cost which is lower than the prevalent market price otherwise buying from open market would be more sensible. Shareholders must be convinced of the future prospects of the company. Usually rights issues indicate that the management is confident about future growth prospects.