Reliance Rights Issue & Dematerialized Rights Entitlement Trading

Update: June 12th

The listing date has been postponed to June 15th instead of June 12th. You will be able to see and sell your allotted rights shares in your holdings from June 15th.

In a rights issue, a company gives you the right to apply for additional shares based on the number of shares already held by you. The company may issue these shares either to fund a new project, reduce debt, or restructure its equity capital base. Reliance has announced a plan to issue shares to its existing shareholders on rights basis to lower its dependence on debt.

Issue details
Ratio 1:15
Issue Price ₹ 1257
Issue Period May 20th to June 3rd
RE Trading Period May 20th to May 29th
Credit of right shares June 11, 2020
Listing date June 12, 2020

You can apply for one share of Reliance at the issue price of Rs. 1257 for every 15 shares held by you. In case you hold the shares of Reliance in your demat account on the record date, you will have the following options:

  1. Subscribe to the rights issue - SEBI has allowed the process to subscribe to the rights issue to be slightly modified during the lockdown period. You will be able to visit the RTA’s website and pay for the application directly from your bank account. (Click here for the usual process which will also be available) The RTA will collect the following details on their website:
  • DP ID & Client ID - You can find your DP ID and the Beneficiary number under the profile section of Console.
  • PAN
  • Bank account details
  1. Let the rights lapse - In this case, you refuse to apply for the rights shares and take no action.
  2. Sell your rights to an interested buyer - You can sell your rights entitlement (RE) for an acceptable price. In case the CMP of Reliance is Rs. 1300 then the theoretical price of the RE will be Rs. 43 (i.e. 1300-1257). The RE can trade at a premium or discount to this theoretical price.

What is Dematerialized Rights Entitlement Trading?

Eligible shareholders will receive the rights entitlement (RE) in their demat accounts before the rights issue opens. The RE will be in the form of temporary demat securities which will lapse if not renounced/exercised. Even if you hold physical shares, you will receive the RE in demat form once you provide your demat account details to the registrar of the company in the form they specify.

You will be able to sell your REs like you sell stocks from your holdings but you will not be able to transact the REs intraday as they will be settled on a trade-to-trade basis. STT at 0.05% of the value of RE is levied on the seller of the RE.

In January 2020, SEBI had issued this circular on streamlining the process of rights issues where the process of dematerialized rights entitlement trading was announced. Subsequently, the stock exchanges issued the following circulars further elaborating on the process:
1. Trading in rights entitlement - BSE, NSE 1, NSE 2
2. Applicability of STT for rights entitlement - BSE, NSE

Edit - Updates:

The issue will be partly paid-up:
image
If you continue holding Reliance-PP shares till the , you will be liable to pay the balance sum. Alternatively, if you sell your holdings, the end buyer will be liable to pay the sum.

Shareholders with less than 15 shares will be given preferential allotment if they apply for one rights share. Excerpt from the announcement on fractional entitlement:

If the shareholding of any Eligible Equity Shareholder is less than 15 equity shares or is not in
the multiple of 15 equity shares, the fractional entitlement of such Eligible Equity Shareholder shall be ignored for the computation of the rights entitlement.

However, the Eligible Equity Shareholders whose fractional entitlements are being ignored, will be given preferential consideration for the allotment of 1 (one) additional Rights Equity Share each if they apply for additional Rights Equity Shares over and above their rights entitlement, if any, subject to
availability of additional Rights Equity Shares in this Rights Issue.

Edit - FAQs

  1. I bought RIL REs but they’re now not showing in my demat account?
    Trading on the RIL-REs stopped on 29th May. You’d be able to view these REs under your holdings on console If you don’t apply for the rights issue through the RTA or via ASBA, you will lose the premium you’ve paid to buy the RIL REs since they will be removed from your demat account.

  2. I am getting a Third Party Verification error. What can I do?
    You maybe using a bank account where your name is not spelled correctly. You can either use a different bank account of yours or use netbanking ASBA if your bank allows it.

  3. After applying for rights issue can I sell the on June 12. if yes how can it be done?
    You will receive partially-paid shares which will list separately. These can be completely sold from Kite upon listing on 12th June.

  4. During application on R-WAP, I am unable to see the REs I’ve purchased. Why?
    The RTA is only showing the eligibility as on record date. They do not have systems in place to reconcile the records of purchased REs in real time. You can apply for your purchased REs and the RTA will check whether you have the requisite number of REs when they are performing allotment.

  5. What will happen to my purchased holding of RE shares if I am not applied for online right issue.
    Your REs will lapse and you will lose the premium paid to acquire them.

  6. While applying for RE issue it shows that please entered your correct DPID of client ID?
    You need to ensure that you’re using the 16-digit ID available here

  7. What is the difference between: “I am a shareholder as on Record Date and undertake to hold RE till issue closing date” and " I am renouncee and hold rights entitlement in valid demat account to hold RE till issue closing date". Which option would I have to choose in that case?
    If you’re buying REs from the secondary market, you’re buying it from someone who is renouncing his right. The seller would be the renouncer and the buyer would be renouncee. If you were an eligible investor and had at least 1 RIL share as on the record date, you’ll need to select the share-holder option.

  8. I don’t have Reliance but bought REs, am I still eligible to apply for the rights issue?
    In case you have bought REs but don’t have Reliance shares, you’re still eligible for the rights issue. You may apply for the rights shares either through the RTA’s portal or via netbanking ASBA if your bank allows it. If you don’t take any action, and let the REs remain in your Zerodha account, they will lapse after the issue closes.

  9. I already paid Rs. 215 to acquire the RIL-REs, am I not eligible for the rights issue and why do I have to pay an additional of Rs. 314 per share?
    The price paid to acquire REs only makes you eligible for the rights application. Alternatively, if you’re already eligible for certain number of rights shares, you can still buy REs to become eligible for more rights shares.
    The RTA will check if you hold the REs in your demat account and perform the allotment. If any share is not allotted, the RTA is required to refund the money to your bank account.

  10. When can I sell my partly-paid shares? Will I be asked to make the payment for the 2nd call too?
    You will receive partially-paid shares which will list separately. THe tentative date of listing is 12th June. These can be completely sold on listing. Once you’ve sold the shares, you aren’t required to pay subsequent call money. The end buyer of these shares will be liable.

12 Likes

Hi Team,

Can the rights issue which were recently announced by RIL be purchased on Zerodha platform? If so when is the window for purchasing the same? I am an existing shareholders of RIL and an active traders on Zerodha

Thanks in Advance

You will not be able to subscribe to the rights shares on Zerodha; SEBI requires all applications to be made through the ASBA route. Click here for the process. The rights window is yet to be announced by the company.

Will the rights entitlement would be automatically shown on kite holdings which we then able to sell it.

Once the REs are credited to your account, you will be able to see and sell them like normal cash market scrips.

What would be the expiry date and time ?

The REs will theoretically lapse on issue closure and should be removed from your demat account once the Registrar and Transfer Agent (RTA) has processed all the applications (which happens within a few days from issue closure).

@mohitmehra what about RE for shares that are pledged with broker.

The broker will receive the REs in their demat account and subsequently be able to make an off-market transfer to the respective client accounts. So, the client will receive the REs even if they don’t unpledge their holdings.

Okay and what in case the amount of share pledged is not in multiple of 15. Suppose there are two clients one had pledged 10 share and other had 5. Doesn’t it give unfair advantage to broker who will receive RE for those 15share or he is obliged to return the proceeds of those RE in proportionate basis.

The client will be able to unpledge the shares to ensure undue advantage isn’t passed to the broker. Unpledging the shares would be operationally more feasible for the broker.

Hi @mohitmehra,

If I have 10 shares of reliance in my zerodha and 5 shares in my ICICI account. In that case, Am I eleigible for exercising the rights?

The RTA does a folio wise check for the eligibility. Although the same PAN would be mapped to both your demat accounts, the shares would be held in separate folios in the RTA’s records. This means that you will not receive the rights entitlements in a scenario where you have 10 shares in one demat account and 5 shares in another.

I bought 30 shares of RIL on last Friday but it’s still showing T1 in my holding. What happens now?

We follow a T+2 settlement cycle in India. This means shares are generally delivered to your demat account two working days after the transaction date. A purchase made on Friday will be delivered in your demat account on Tuesday (i.e. after two working days) provided there isn’t a short delivery.

You’ll be able to see the RIL shares as normal holdings once the shares are credited to your demat account by EOD today.

1 Like

If I buy Reliance shares today, will I be eligible for rights issue since the shares would be delivered on 15th May.

No, since the shares have to be in your demat account by EOD May 14th.

Hi Mohit, Thanks for the article. I am not able to locate where exactly I have to go?

Blockquote
You will be able to visit the RTA’s website and directly pay for your application from your bank account using the RTA’s payment gateway

I cannot see the the exact link where I have to fill up the details and pay for Reliance Right Issue. This might be very basic question but this is my first time for IPO/Rights Issue.
P.S I tried ASBA. Connected my Demat account but somehow Reliance options are not visible over there.

The RTA will put up the exact link on their website once the issue is live. Same goes for the banks which will support the issue.

1 Like

Thanks Mohit, Is there any place where I can check that or I have to keep following the news for that?