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Asked a question 3 years ago

When a right entitlement (RE) is purchased through exchanges, how it will reflect in demat account post the closing of rights issues period?

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Hi Nishith,

Let me quickly explain you about REs

  1. REs are temporary demat securities that represent the shareholder’s eligibility to apply for the rights issue. 
  2. REs are offered to shareholders as a ratio to the number of securities held on the record date.
  3. REs are credited to the demat account before the date of opening of the issue.
  4. REs are traded on the secondary market platform, with T+2 rolling settlement, similar to the equity shares.
  5. Trading in REs s commences along with the opening of the rights issue.
  6. Trading in REs closes at least four days prior to the closure of the rights issue.
  7. RE  losses its value after the closure of the right issue period. Trading in RE is suspended after the closure of Right issue periods and there after RE is forfeited. 
  8. Investors holding REs in dematerialized mode shall be able to renounce their entitlements by trading or off-market transfer. Such trades will be settled by transferring dematerialized REs through a depository mechanism, in the same manner as done for all other types of securities.

Hope this answer your query. If further any doubt, please feel to reach out.

It will Lapse with no value (post rights issue closure), if RE is not exercised.