How to Apply for Rights Issue?

 What is Rights Issue?

A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. 

With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date. 

The company is giving shareholders a chance to increase their exposure to the stock at a discount price.

Why Rights Issue?

Company need money for followings

• Expansion
• Debt Repayments (Reliving high Interest rate Debt)
• Merger & Acquisitions
• Due to poor credit rating, Banks may not lend further. Need capital for Ongoing operations

What is Ex-Date?

Most of the Corporate Actions ( Bonus, Split, Dividend, Rights, Buyback) eligibility is decided by Registrar who is keeping the all the Investors name of that company.  

Lets take Ex-Date for Rights:

In India, Trade settlement is happening in T+2 days. 

When You buy today, Your name will appear in Registrar book on T+2 days. But people buy and sell everyday, Company needs to create cut off to find the eligible shareholders for Rights. 

Technically, you are eligible for Rights if you buy one day before Ex-Date. On Ex-Date, the price is adjusted by Market as per rights price. As per Registrar, Your broker name is available in Registrar Book NOT your name on Record Date ( due to one day short in T+2 settlement time frame). 

But I would recommend to buy 2 days before the Ex-Date. So you can freely apply for Rights more than your eligible Rights entitlement. In this way, your name would be available in Registrar book NOT your Broker name.

How to Apply?

* Send signed Rights application document to your Broker

* Use ASBA facility on IPO/ Rights setion in your Net banking ( not all banks provide this option)

* Use R-WAP online net-banking or UPI if Linktime registrar