All you need to know about Rights Entitlements (REs)

Will I qualify for the rights issue if I buy shares on the ex-date?
To qualify for the rights issue, you have to buy the shares before ex-date.

Will I qualify for the rights issue is I sell the shares on the ex-date?
Yes, if you sell your shares on or after the ex-date, then you are entitled to receive the RE. It will be credited to your broker on your behalf, and then be transferred to you by your broker.

I am receiving a Third Party Verification error on the RTA portal. What should I do?
You might be using a bank account where your name is spelled incorrectly. To resolve this, you can use a different bank account or use the net banking ASBA if your bank permits it.

During the application on R-WAP, I am not able to view the REs that I have bought. Why is this happening?
The RTA only shows the eligibility as on record date. They don’t have systems in place that can display the records of REs bought in real time. You have the option of applying for the REs you have bought and the RTA will check whether you have the required number of REs when they are carrying out an allotment.

What will happen to my bought holding of RE shares if I don’t apply for the online rights issue?
If you don’t apply for the online rights issue, your REs will lapse and you will lose the premium paid to get them. The REs will then be in the form of temporary demat securities which will lapse if they are not renounced or exercised once the trading window closes.

While applying for rights shares, I see the message, “Please enter your correct DPID or client ID?”
The message might pop up when you have entered the wrong DPID or client ID. So, double check your credentials to move forward.

What’s the difference between, “I am a shareholder as on record date and undertake to hold RE till issue closing date” and I am a renouncee and hold rights entitlement in valid demat account to hold RE till issue closing date.” Which option would I have to choose in such situation?

If you are purchasing REs from a secondary market, you are purchasing it from someone who is renouncing their right. The seller would be the renouncer and the buyer would be renouncee. If you are an eligible investor and have at least X number of shares as on the record date, then you need to choose the shareholder alternative.

I don’t have the shares but I have bought REs. Do I still qualify to apply for the rights issue?
If you have purchased REs but don’t have the shares, you still qualify for the rights issue. You can apply for the rights issue either through the RTA portal or through net banking ASBA if your bank permits it. If you fail to take any action, and let the REs remain in your trading account, then they will lapse after the issue.

Will the REs automatically reflect in my investments? Will I be able to sell them?
After the REs are credited to your account, you will be able to see and sell them just like normal cash market stocks.

What is the expiry date and time for REs?
In theory, REs lapse on issue closure and should be removed from your demat account once the RTA has processed all the applications which occurs within a couple of days from the issue closure.

The company has announced a rights issue in the ratio of 1:10. If I have 5 shares of the company in my trading account and 5 shares in my ICICI account, do I still qualify for exercising the rights?
The RTA carries out a folio wise check for eligibility. Even though the same PAN is mapped to both your demat accounts, the shares will be held in two separate folios in the RTA records. This implies that you will not get REs in situations where you have 5 shares in one demat account and 5 shares in another account.

I can’t see the link where I have to fill in my details and pay for the right issue.
The RTA puts up the link on their website once the issue goes live. The same applies for banks that support the issue.

Can I sell the shares on record date and still receive the rights issue benefit?
If you had the shares in your investments on the record date, you will be eligible to apply for the rights, even after you decide to sell them on the record date.

What if someone sells their REs and then applies for the rights issue? How will the RTA do it?
The RTA will gather your demat account details and check for REs before allotment.

Should I unpledge the shares to get REs to stand eligible for the rights issue?
The REs will be credited to your demat account, so there is no need for you to unpledge your shares.

At what price can I sell my REs in the market?
You can choose to sell the REs at a price range someone’s willing to buy them at. Market forces in play will decide the price at which the REs will trade.

What will happen to my REs if I don’t sell them?
The REs will lapse and will be removed from your investments. Plus, you will lose any premium paid to acquire those REs.

I have X number of shares and I have applied for Y more apart from my eligible 1 entitlement. Will I be considered for additional shares? I have paid the initial amount to the RTA. If I don’t qualify for the additional shares, will they refund the amount back to my bank account?
You might be considered for an additional allotment by the RTA, but it all depends on which issue subscription you have applied to. The amount that you pay is kept in an escrow amount that’s maintained by the RTA and will be refunded if the allotment is not placed.

What does recouncee signify here? I am not renouncing my rights instead I want to opt for more rights that I have purchased.
If you are purchasing REs from the secondary market, you’re purchasing it from some who is renouncing their right. The buyer would be the renouncee and the seller would be the renouncer.

How can NRIs purchase REs since they can’t pay via RTA?
If you bank permits ASBA via net banking then you can apply as an NRI.

If I am buying the REs from the market today, can I apply directly through ASBA or RTA on the web?
Yes, you can use any two of the above mentioned options to apply.

Do all the REs get shares or will it be like subscribing to an IPO (lottery system)?
If you have X number of REs, and you apply for X+Y shares, you will get X shares since you stand eligible for them. For the remaining Y shares, there will be a lottery.

Would I have to wait for REs to be credited to my account to be able to apply for the rights issue?
The RTA will inspect the demat account for REs during allotment. It is basically asking whether you already have REs or have bought it. There isn’t a third option in which says you will buy the REs within the RE trading period.

What is the tax treatment when it comes to REs?
The taxation of right shares sold is same as the sale of equity shares.

If STT is paid, it will be as follows:

• LTCG - 10% in excess of Rs. 1,00,000 under Section 112A
• STCG – 15% under Section 112A

If STT is not paid, it will be as follows:

• LTCG – 10% without indexation
• STCG – Slab Rate I have purchased some RE units today in 4 transactions (3 units each time), will I have to place as many orders on RTA website or just one combined order will be sufficient?
  You can place one combined order for all the REs that you have bought.

Are multiple applications allowed?
RTA has notified that multiple applications are not permitted, and if they are made, they are liable to get rejected.

I am getting the error on the RTA website, “Details do not exist in Record Date.”
If you have bought RE from the secondary market, then apply from the “renounce” category” to resolve this issue.

What happens to the amount if I don’t get the allotment?
If any shares are not allotted to you, your money will be credited to your bank account by the RTA after the completion of the allotment process.

Can I make payments from another bank as this bank fulfils both the conditions of being a single account holder and residential bank account? Can I change the bank details?
There’s a third party restriction that prohibits the use of some other individual’s bank account to pay for your own application. Payments from any bank account are accepted as long as you are the registered account holder. The RTA does a penny drop check to crosscheck the same.

I don’t have any securities on the record date. Can I still buy REs through my trading account and then purchase shares against the RE?
Yes, you can buy REs until the RE window closure date and apply before the rights issue is closed.

My bank account isn’t automatically mapped and I am attempting to pay via a different account. However, in spite of it being my bank account, I am receiving an error, “3rd part validation failed.” Why?
The error could pop up because of reasons like incorrect registered name, incomplete name in the bank record, etc. The best way to resolve this issue is to check directly with the RTA.

Is CAF number mandatory to apply for rights issue?
Since there are no physical rights composite application forms, CAF number is no longer mandatory. If the bank still has it on its portal, then you can enter any dummy number like your PAN. Please reach out to your respective bank to confirm the process, but most of banks have already greyed out the CAF field in their portal.