When a company offers its existing shareholders the opportunity to purchase additional shares at a discounted price, it does so through a Rights Issue. To participate in this, shareholders must first apply for Rights Entitlements (REs). This process may appear complex for first-time investors, but it’s straightforward once understood. Here’s a detailed guide on how to apply for Rights Entitlements.
What is Rights Entitlement (RE)?
Rights Entitlement (RE) represents the right of an existing shareholder to apply for additional shares in a rights issue. These REs are credited to shareholders in their Demat accounts and can either be exercised (used to apply for the shares) or sold in the secondary market if not intended to be used.
Step-by-Step Guide to Applying for Rights Entitlements
1. Check Eligibility and Record Date
To be eligible for a rights issue, you must be a shareholder as of the record date announced by the company. On this date, the company identifies the eligible shareholders who will receive REs in proportion to their existing holdings.
2. Receive RE in Demat Account
If you’re eligible, the REs will automatically be credited to your Demat account under a separate ISIN (International Securities Identification Number). You can view them by logging into your Demat account with your broker or depository participant.
3. Understand the Terms of the Rights Issue
Review the following details:
- Issue price (discounted share price)
- Ratio (e.g., 1:3 means 1 right share for every 3 held)
- RE trading period (typically 7-10 working days)
- Application window
4. Choose Your Course of Action
You can either:
- Apply for the shares using the RE
- Sell the REs in the secondary market before they expire
- Ignore the REs, but they will lapse worthless if not used or sold
5. Apply for the Rights Shares
There are two common ways to apply:
a. Using ASBA via Net Banking
- Log in to your net banking account.
- Go to the ASBA (Application Supported by Blocked Amount) section.
- Select the company offering the rights issue.
- Fill in the required details: PAN, number of shares, DP ID/Client ID.
- Submit your application.
b. Through RTA’s Website (Non-ASBA)
Registrar and Transfer Agents (RTAs) like KFinTech or Link Intime provide a portal to apply:
- Visit the RTA’s website.
- Click on the “Rights Issue” section.
- Enter your PAN and Demat details.
- Submit the form and make payment through UPI or net banking.
Important Points to Remember
- Ensure sufficient funds in your account while applying.
- Carefully note the last date to apply.
- REs are non-renounceable or renounceable, depending on the issue—this affects whether you can trade them.
- If you miss applying or selling the REs, they will expire worthless.
Conclusion
Applying for Rights Entitlements is a cost-effective way for shareholders to increase their stake in a company at a discounted price. With a little planning and awareness, investors can benefit significantly from rights issues. Always read the Letter of Offer carefully and acHow to Apply for Rights Entitlement (RE): A Step-by-Step Guide for Investors
When a company offers its existing shareholders the opportunity to purchase additional shares at a discounted price, it does so through a Rights Issue. To participate in this, shareholders must first apply for Rights Entitlements (REs). This process may appear complex for first-time investors, but it’s straightforward once understood. Here’s a detailed guide on how to apply for Rights Entitlements.
What is Rights Entitlement (RE)?
Rights Entitlement (RE) represents the right of an existing shareholder to apply for additional shares in a rights issue. These REs are credited to shareholders in their Demat accounts and can either be exercised (used to apply for the shares) or sold in the secondary market if not intended to be used.
Step-by-Step Guide to Applying for Rights Entitlements
1. Check Eligibility and Record Date
To be eligible for a rights issue, you must be a shareholder as of the record date announced by the company. On this date, the company identifies the eligible shareholders who will receive REs in proportion to their existing holdings.
2. Receive RE in Demat Account
If you’re eligible, the REs will automatically be credited to your Demat account under a separate ISIN (International Securities Identification Number). You can view them by logging into your Demat account with your broker or depository participant.
3. Understand the Terms of the Rights Issue
Review the following details:
- Issue price (discounted share price)
- Ratio (e.g., 1:3 means 1 right share for every 3 held)
- RE trading period (typically 7-10 working days)
- Application window
4. Choose Your Course of Action
You can either:
- Apply for the shares using the RE
- Sell the REs in the secondary market before they expire
- Ignore the REs, but they will lapse worthless if not used or sold
5. Apply for the Rights Shares
There are two common ways to apply:
a. Using ASBA via Net Banking
- Log in to your net banking account.
- Go to the ASBA (Application Supported by Blocked Amount) section.
- Select the company offering the rights issue.
- Fill in the required details: PAN, number of shares, DP ID/Client ID.
- Submit your application.
b. Through RTA’s Website (Non-ASBA)
Registrar and Transfer Agents (RTAs) like KFinTech or Link Intime provide a portal to apply:
- Visit the RTA’s website.
- Click on the “Rights Issue” section.
- Enter your PAN and Demat details.
- Submit the form and make payment through UPI or net banking.
Important Points to Remember
- Ensure sufficient funds in your account while applying.
- Carefully note the last date to apply.
- REs are non-renounceable or renounceable, depending on the issue—this affects whether you can trade them.
- If you miss applying or selling the REs, they will expire worthless.
Conclusion
Applying for Rights Entitlements is a cost-effective way for shareholders to increase their stake in a company at a discounted price. With a little planning and awareness, investors can benefit significantly from rights issues. Always read the Letter of Offer carefully and act before deadlines to avoid missing out. t before deadlines to avoid missing out.
