What is a Rights Issue?
A Rights Issue (RI) is a corporate action wherein shareholders of a company are invited to purchase additional shares in proportion to their existing holdings, at a discounted rate as compared to the current market price.
- They are generally offered to raise additional funds for expansion, pay off debts, etc.
- The demat accounts of existing shareholders are credited with Rights Entitlements (REs) in a specific ratio as per holdings.
- Getting the entitlement shares in your demat account does not imply that you have received the rights shares; you will have to apply for shares based on these entitlements.
Important Dates during a Rights Issue: For example, Minda Industries concludes its Annual General Meeting (AGM) on 8th June. A 2:7 rights issue is approved by the Board of Directors and related dates are announced. That is, shareholders will receive entitlements to purchase 2 shares (at a discounted price) for every 7 shares held.
|Declaration Date: 8th June
|The day the rights issue is announced to the public.
|Ex-date: 17th August
|To be eligible to receive REs, purchases must be made on or before 16th August.
Investors who purchase shares on or after the ex-date will not be eligible to receive REs.
From the rights issue declaration date to the ex-date, the shares are said to be trading cum rights (with rights)
|Record Date: 17th August
|All shareholders of Minda Industries as per company records on 17th August will receive REs in the given ratio (2:7).
|Issue Window: 25th August - 8th Sept
|REs will be credited to eligible shareholders and they will be intimated regarding the application window. During the period:
i. Applications for purchasing shares can be made using these entitlements
ii. Entitlements can be traded (bought and sold/renounced) on the stock exchanges
|The day the allotted shares are credited to the demat accounts of investors, as per applications.
If you have not received complete allotment against your application, the remaining amount will be refunded to your bank account.
Since we have shifted to the T+1 settlement cycle, the ex-date and record date for corporate actions fall on the same day.