Rights issue (RI) is an offer that a company grants its shareholders the right to buy the additional shares of the company at a discounted price to the current market price. Reliance has announced rights issues and the details are as mentioned below.
Ratio: 1:15 (You shall receive 1 equity share for every 15 shares you hold in your demat account)
Issue Price: Rs.1257 (A discounted prices to the market price)
Issue Date: May 20,2020 to June 3, 2020
Allotment Date: June 10, 2020
Credit of right shares: June 11, 2020
Listing Date: June 12, 2020
Record Date: 14-May-2020
RIL-RE credit to demat account:
Reliance RTA (Registrar and Transfer Agent) identifies the shareholders who hold Reliance shares as on Record date (14-May-2020) in their demat account. RTA then transfers the Reliance Rights Entitlement share (RIL-RE) to the respective demat account in the ratio of 1:15. I.e. If you have 150 shares as on record date in your demat account then you shall receive 10 RIL-RE shares to your demat account.
How to subscribe to the Reliance Rights Issue?
As per the traditional procedure, Rights Issue could only be applied through couriering the application form to the address mentioned in the form or through ASBA (Applications Supported by Blocked Amount) just like IPO. Considering the lockdown period, SEBI has slightly modified it to apply online on RTA’s website. You can make payment online. Kindly note third party bank account is not allowed as per SEBI.
Understand Reliance Rights Entitlement (RIL-RE) with an Example:
RIL-RE Trade Start Date: 20-May-2020
RIL-RE Trade End Date: 29-May-2020
Assume you have 150 shares of Reliance on Record-date (14-May-2020). As per the ratio announced you shall receive Reliance Entitlement (Symbol: RIL-RE) of 10 shares (For each 15 shares held in demat, you shall receive 1 additional RIL-RE share. For 150 shares, 10 RIL-RE shall be received from RTA) to your demat account. The shares can be seen in the BOX Back office login as shown under.
Since you have RIL-RE shares in your demat account, you have got the below three options.
- Subscribe to the Reliance Rights issue on RTA’s website by paying Rs. 314.25 as the first installment. Rs.314.25 in May 2021 as the second installment and the final installment of Rs.628.50 in November 2021, for each share that you are entitled to. Kindly note third party bank account is not allowed as per SEBI.
- You can ignore it by doing nothing.
In this case, you do not apply for Rights issue (RI) and are allowed to lapse.
- Sell the rights to someone else
You will be allowed to sell the Reliance Rights Entitlement (RIL-RE) to someone else in the open market just like a normal share. This means you are renouncing your rights to someone else. Kindly note RE shares can be traded in the market only till 29-May-2020. In case the RE stocks held beyond the said date then your entitlement is considered to be lapsed.
Understand how trading is done in RIL-RE
Not only can you sell your RE in the open market but also you can purchase RE from the open market just like you purchase a normal share. Below are the important notes if you purchase.
- Once purchased from the open market, you shall receive the RE shares from the exchange on T+2 days to your demat account.
- You either have to apply for RIL shares from the link or sell (Renounce) your entitlement again in the open market. This activity has to be done before 29th May, 2020.
- Failing to do the 2nd point, all your RIL-RE shall lapse after 29th May, 2020. Hence, your investment in RE shall have no value after the said period.
- RIL-RE can be traded as a normal share before 29th May, 2020. Since, it is categorized as T2T, you can only trade in delivery. No short selling or intraday trades are allowed.
- If you have RIL-RE in your demat account then you can apply for Reliance rights issues, irrespective of whether you are the original allottee or you have purchased from the open market.
- The eligible shareholders having fractional entitlements and the eligible shareholders with zero entitlement, shall be given preferential consideration for the allotment of one additional Rights Issue, if he/she applies for it. However, the allotment shall depend on availability of additional Rights Equity Shares.
- For more information on Reliance Rights Issue, kindly refer to FAQs.
Reliance Shares having in Physical form
If you have Reliance Equity Shares in physical form as on Record Date, have not provided the details of the demat accounts to the Company or to the Registrar, then you are required to provide the demat account details to the Company or to the Registrar not later than two Working Days prior to the Issue Closing Date, i.e. Monday, June 1, 2020 to get the RIL-RE to your demat accounts. For more information, kindly refer FAQ section B.
Reason why company goes into rights issues
- To pay down debts
- To expand the companies business
- To acquire a competitors