1. What is the Rights Issue?

When a company offers its existing shareholders an opportunity to buy additional shares at a reduced price is known as the Rights Issue. This discounted price is usually for a specific period and the number of shares issued is on a pro-rata basis.

2. What are the various types of Rights Issue of shares?

Below-mentioned are the types of Rights Issue:

1. Fully Paid Rights Issue
When you have to pay the entire amount at the time of applying for the Rights Issue.

2. Partly Paid Rights Issue
When you are required to pay only a partial amount while applying for the Rights Issue. However, you will have to pay the remaining amount in the subsequent payment calls by the company. You must note that in case of failure to make the payment, your shares will be forfeited.

3. When am I eligible for the Rights Issue?

If you are an existing shareholder of the company that has announced the Rights Issue on the record date, you are eligible in proportion to the shares held by you.

4. Why does a company offer a Rights Issue?

The major reason why companies announce the Rights Issue is to raise money. Various other reasons are:

• To expand their business
• To acquire new business
• To repay all the debts

5. How many shares will get allotted to me under the Rights Issue?

As an existing shareholder, in the Rights Issue you get the right to buy new shares in proportion to the existing shares you are holding.
For example, 1:15 Rights Issue means for every 15 shares you are holding, you can get 1 additional share.

6. Does every company announce Rights Issue in the same ratio?

No, every company doesn’t do Rights Issue in the same ratio. The ratio is decided by the company.

7. What is Right Entitlement?

The number of shares you are entitled to in the Rights Issue is known as the Rights Entitlement.
Note: You should keep in mind that RE is temporary and until you apply and pay the requisite amount, rights shares won’t be credited to your Demat account.

8. How RE is different from the regular shares?

RE is different from the regular shares as you need to buy them from the primary/secondary market at the current price, whereas, rights entitlement is credited to your account in a dematerialized form on a proportionate basis if you are an existing shareholder.

9. What is the difference between Rights Issue and Rights Entitlement?

A rights issue is a corporate action that a company takes to expand its business, increase its working capital, or clear its debts. But, rights entitlement is the rights issued to the existing shareholders to subscribe to the new shares that they are eligible to apply for under the rights offer. REs are temporary in nature and can be traded in the secondary market. However, if no action is taken on REs, they will lapse on the closing date of the Rights Issue.

10. Where can I obtain detailed information about REs of the Rights Issue?

For detailed information about the Rights Issue, kindly refer to the Letter of Offer (LOO) of such issuer. This letter contains a detailed process related to REs, trading details, important date, etc.

11. When will the RE be credited to my account?

RE will be credited to your account in a dematerialized form under a separate ISIN number before the opening of the Rights Issue.
Note: The ISIN for your REs shall be kept frozen in the depository system till the opening of the rights issue.

12. I have received RE, does it mean I have received rights shares?

No, you have to apply and pay the requisite amount to get these rights shares.

13. How physical shareholders can get their REs?

If you are holding physical shares, you need to provide your Demat account details to the Issuer / Registrar not later than two working days prior to the issue closing date to get the REs credited. This is to ensure that REs be credited to your Demat account one day before the issue closing date.

14. What can I do with my Rights Entitlement?

You have 3 options to choose from:

• Use your rights entitlement to buy and get the ownership of the shares
• Transfer your rights entitlement in part or full by trading on the stock exchange or off-market to earn a profit (Renunciation of rights issue). If you are not entitled to rights shares, you can buy them in the secondary market when existing shareholders begin selling them
• Do nothing to your rights entitlement and let the rights lapse

15. How can I apply/participate in the Rights Issue?

You can apply for the rights issue using either of the two methods mentioned below.

Online ASBA

• You can visit the website of the SCSBs* (Self-certified Syndicate Banks) to apply online for the rights issue.

Offline/Physical ASBA

• To apply offline, you can submit a physical application for participating in the rights issue to the designated branch of SCSBs*.

*Please check the complete list of existing SCSBs here.

16. What will happen to the Rights Issue if my Demat account is frozen?

In both the below-mentioned cases, REs will be credited in a suspense escrow Demat account of the company, and an intimation will be sent to such shareholders by the Issuer / Registrar of the issue.

• Demat account is frozen
• Demat account details are not available
• Shares held in the unclaimed suspense account
• Shares held in the account of the IEPF Authority

17. What options do I have as an eligible shareholder in the Rights Issue?

As an existing shareholder, you have the following options:

• You can buy the shares in full or partially in the Rights Issue
• You can avoid buying the shares in the Rights Issue
• You can sell your rights in the open market to other investors

18. What forms need to be filed for applying for the Rights Issue through ASBA?

If your bank doesn’t support the online process, download the application form from RTA (Registrar and Transfer Agent) website. Once you have filled out the form, you need to submit it at a Self-Certified Syndicate Bank (SCSBs) branch.

Following are the details required in the form.

• ASBA Bank Account Number, Account Holder Name, and SCSB Name & Address
• Your Depository Participant (DP) ID (select NSDL if it starts with IN otherwise, select CDSL if it contains only numbers)
• PAN number (also provide the PAN number of the second holder if it is a joint account)
• Signature (in case of a joint account signature of both parties will be required)

Usually, it takes around 15-20 days from the Book Closure Date for the stocks to get credited.

19. I have sold the shares after the record date, am I still entitled to the Rights Issue?

If you held shares on the record date, then you are eligible for the Rights Issue.

20. Can I submit multiple applications from one Demat account for REs?

No, you can submit only one application for REs available in your Demat account.

21. How much do I have to pay to get REs?

REs credited to your account are not chargeable, however, if you buy them in the secondary market, you will have to pay the requisite amount.

22. What will happen to my RE if shares are in CUSA?

If you have shares in CUSA, you will be eligible for the Rights Issue. However, only once you have cleared your dues, we will credit RE in your account. If you don’t want to apply for RE, you can sell RE in the secondary market without having to clear your dues.

23. How will I know if my shares are in CUSA?

You can see shares held in CUSA in the pool holding under the Portfolio Section of our app.

24. What is renunciation of rights?

The process of transferring your REs to any other person is known as the renunciation of rights.

Note: These trades will be settled by transferring dematerialized REs through a depository mechanism, similar to all the other types of securities.

25. How can I renunciate the rights?

Below are the processes for on and off market renunciations:

• On Market Renunciation
  You can renunciate the rights by trading them in the secondary market in the same manner as trading equity shares of the company
• Off Market Renunciation

  You can renounce the RE by way of an off-market through a depository participant in the dematerialized form only. However, you need to ensure that the REs are credited to the Demat account of the Renouncees on or prior to the issue closing date.

26. What is the difference between the renunciation date and the closing date?

The Renunciation Date is the last date by which REs can be traded, whereas, the closing date is the last date by which you can apply/participate in the Rights Issue.

27. How can REs be traded?

Trading in REs on the secondary market platform of stock exchanges shall commence along with the opening of the rights issue. If you are not the existing shareholder of the company on the record date, you can purchase the REs in the secondary market.

You should note that trading in REs will close at least 4 days prior to the Rights Issue closing date. Also, REs will be settled on a trade-to-trade basis.

28. What are the trading details for REs?

Below are the required details for different parameters:

• Market Type - Equity Market
• Settlement - T+2 Rolling Settlement
• Group available for trading- “R”
• Lot size- 1 share
• Order Type- All Orders types like Market Order, Limit Order, Stop-Loss Order, ROBO Order, Intraday, and more applicable in continuous trading

29. I have purchased RE in the secondary market but forgot to participate in the Rights Issue. What will happen now?

The value of your RE will be zero and it will lapse post closing of the Rights Issue even if you have paid for the REs. If you have purchased RE in the secondary market, you need to apply for the Rights Issue or else you will lose the money you paid to acquire the REs.

30. If I don't participate in the Rights Issue offer, what will happen to RE?

In both the cases mentioned below, your RE will lapse after the offer closing date.

• You haven’t applied for Rights Issue
• You applied for Rights Issue but failed to pay the requisite amount

31. I have been asked to pay only 25% of the rights price, what will happen now?

On paying 25% of the amount, you will receive party paid-up shares in your account. Until you pay the full amount, you won’t be able to trade REs. You should know that if you failed to pay the call money, your RE will lapse.

32. What will happen if I fail to pay the call money?

In this case, the company may decide to forfeit your shares and the amount you have paid will also lapse.

33. Will I get a refund for the amount I have paid for the shares that get forfeited?

No, if your shares are forfeited by the company, you won’t receive any refund.

34. Can I trade REs if I have already paid the part amount?

There are 2 things which you can do with regards to your partly paid-up REs:

• Pay the remaining call amount as and when demanded by the company and get the equivalent shares credited to your Demat account.
• Trade your partly paid-up REs in the secondary market. For example - if you have REs of ABC company of ₹1500 and you have paid 2 calls money of say ₹1150. If you don’t want to proceed further with the purchase, you can sell your REs in the secondary market.