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
|Credit Date ||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.