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Rights Entitlement

Modified on: Tue, 18 Oct, 2022 at 2:36 PM

TABLE OF CONTENTS

What is Rights Entitlement?

It is the rights issued to an existing shareholder by the Company, to subscribe to new shares / other securities which the shareholder is eligible to to apply under the rights offer. Rights Entitlements (REs) are offered to shareholders based on a ratio of existing equity shares held as on the record date.  

How do I get the Rights Entitlement?

The Rights Entitlement will be issued to the eligible shareholder in the demat mode under different ISIN


What options are available to an eligible Equity Shareholder in terms of Rights Issue?

An Eligible Shareholder can do any of the following:

  • Apply for the entire number of Rights shares as per the Rights Entitlement
  • Apply for the entire number of Rights shares as per the Rights Entitlement and apply for additional Rights shares
  • Apply for Rights shares to the extent of a part of the Rights Entitlement and leave the remaining without renouncing
  • Apply for Rights shares to the extent of a part of the Rights Entitlement and renounce the remaining
  • Fully renounce the Rights Entitlement

What is the process to renounce Rights Entitlements?

The Rights Entitlements can be partially or fully renounced. This renunciation can be done in Market or Off Market.

On Market Renunciation

If you sell your Rights Entitlement in the market it is referred to as On Market Renunciation. The settlement of the shares will happen as in normal case.

Off Market Renunciation

You may also transfer the Rights Entitlement via Off Market transfer. However, this needs to be transferred to the renouncee on or before the issue closing date.

What will happen if I do nothing with the Rights Entitlement?

If you receive a credit of Rights Entitlement, you need to either apply for the Rights issue or renounce it before the issue closing date. If neither of this is done, it will lapse and get extinguished after the issue closing date. 

I did not have the shares on record date. Can I still apply for the Rights?

Yes, you may, if you had bought the Rights Entitlement in market or acquired through an off market transfer. You may apply for the Rights shares to the extent of the quantity of Rights Entitlement available in your demat account.
 

I bought the Rights Entitlement. Should  I still apply for the Rights Issue to get the shares?

Yes, it is just not enough to buy the Rights Entitlement to get the shares. You will have to necessarily apply for the Rights Issue on or before the issue closing date. Else, the rights will lapse and get extinguished and the money paid by you for acquihiring the Rights Entitlement will be lost.

I hold the shares in physical mode. How do I apply for the Rights?

If you hold the physical share certificates, you need to provide your demat account details to the Registrar of the issue, atleast 2 working days prior to the Issue closing date. The Registrar will then credit the Rights Entitlement due to you to that demat account at least 1 day prior to the issue closing date. This is to ensure that your application for Rights shares are not rejected due to non availability of as on the issue closing date. Please note that the Rights Entitlement should be there in the demat account for successful processing of Rights application.

Where can I find the information about Rights Entitlement?

It can be seen from the Letter of Offer filed by the Rights issuing company with Stock Exchanges. This is also available in SEBI website under section - Home - Filings - Rights Issues. You are advised to read the Letter of Offer carefully. 

How can I apply for the Rights Issue?

The Registrar of the Company issuing Rights will publish the link through which the online application can be made. It can also be applied online through banks that support the issue. 

Can I pay for the Rights Issue from any of my bank account?

Yes, you may as long as you are the holder of the account and the name in your bank matches with the records of the Registrar of the Issue. They verify your name using penny drop mode and validate. You will however, not be able to make payment from some one else's account for the Rights.   

I am a NRI. How can I pay for the Rights Issue?

You may apply through the bank via ASBA mode. This is because, you will not be able to make the payment to the Registrar, otherwise.

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