What are Rights Entitlement (REs)?
Rights Entitlements (REs) are temporary demat securities that represent the shareholder’s eligibility to apply for the rights issue. Rights entitlements are offered to shareholders as a ratio to the number of securities held on the record date.To know more details view,(PDF).
When are REs credited to the demat account?
REs are credited to the demat account before the date of opening of the rights issue.
How and when are REs traded?
REs are traded on the secondary market platform on a T+1 rolling settlement basis, similar to equity shares. Trading in REs starts on the opening date of the rights issue.
When does trading in REs close?
Trading in REs closes a few days prior to the closure of the rights issue, and the exact timeline may vary depending on the company.
How can investors holding REs in demat form renounce it?
Investors holding REs in demat form can renounce their entitlements either by trading them on the exchange or through an off-market transfer. These trades are settled through the depository system on a trade-for-trade basis.
How many applications can be made from one demat account for REs?
Only one application form can be submitted for REs available in a single demat account.
Where can detailed information about a RE be obtained?
Detailed information can be found in the Letter of Offer (LOO) issued by the company. The RTA also sends the Letter of Offer to the shareholder’s registered email after the rights issue is announced.
Which segments are REs traded in?
REs are traded in the equity market segment of the BSE.
How is the base price of REs calculated?
On the first day of trading, the base price of REs is the closing price of the stock. On every subsequent day, the base price is the closing price of the RE on that day.
What is the settlement process for REs?
All clearing members in the CM segment are eligible for clearing and settlement of REs. Trades are settled on a T+1 basis. The clearing and settlement are done on a gross basis for trades and on a net basis for funds.
What happens to shortages in settlement of such trades?
Any shortages in RE settlement are directly closed out at the highest price of RE prevailing from the trading day until T+1, or at 20% above the settlement price on T+1, whichever is higher.
If an individual purchases REs without holding any shares, are they eligible to apply for REs?Yes, even if an individual does not hold any shares, they are still eligible to apply for the rights shares either through the RTA portal or net banking ASBA, depending on their bank’s facility. If no action is taken, the REs will lapse.
What if someone sells their REs and then applies for the rights issue?
The RTA will collect demat details and verify whether REs are held in the account before processing the allotment.
Should I unpledge the shares to receive REs and be eligible for the rights issue?
No, shares do not need to be unpledged to receive REs, and they will be credited to the demat account as usual.
At what price can I sell my REs in the market?
There is no fixed price for REs as the price is determined entirely by market forces.
What will happen to my REs if I do not sell them?
If REs are not sold or used to apply for the rights issue, they will lapse and be removed from your holdings, resulting in a loss of any premium paid.
How can NRIs buy REs, since they cannot pay through RTA?
NRIs can buy REs if their bank allows ASBA through net banking, in which case they can apply accordingly.
How to apply for rights issues if the REs are purchased from the markets or via trading?
If REs are purchased from the market, investors can apply for the rights issue either through ASBA or directly through the RTA.
Does the RE need to be credited to my account to be eligible to apply for the rights issue?
Yes, REs must be credited to the demat account in order to be eligible to apply for the rights issue. The RTA checks demat accounts for REs during allotment.
Can multiple applications for REs be made?
No, multiple applications from the same demat account are not allowed and are liable to be rejected.
Are the REs credited in the same ISIN number as equity shares or in a different ISIN number?REs are credited under a separate ISIN to the demat account of shareholders based on their shareholding as on the record date.
What are the options available with a shareholder for the REs credited to the demat account?Shareholders can either apply for equity shares of the company in full or in part using the REs, or they can renounce or sell their REs in the market.
While applying for REs in multiple transactions, does the order need to be placed multiple times or can one consolidated order be placed?
A single consolidated order can be placed for all REs purchased in multiple transactions. |