What is Rights Entitlement? Important pointers that one must know about trading Rights Entitlement

Rights Entitlement: A right is issued by a company to its shareholders on a pre-determined date called the record date. Now, there is a question in the minds of the investors regarding this. Can a person who is not a shareholder of the issuer company as on the record date, apply to the rights issue?

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Can a person who is not a shareholder of the issuer company apply to the rights issue?

In one of its recent tweets, NSE said that it is possible for a person who is not a shareholder of the issuer company as on the record date to apply for a rights issue. However, they need to purchase Rights Entitlement and then subscribe to the rights issue before the issue closes.

How are Rights Entitlements offered?

In this regard, there are certain important pointers that an interested individual need to know about Rights Entitlement. Rights entitlements are offered to shareholders as a ratio to the number of securities held on this record date, as per the official NSE website. A shareholder may refuse to subscribe to the rights issue and just let the 'right' lapse. Alternatively, the shareholder can renounce/trade the entitlement in favour of another person for a price.

How to trade Rights Entitlement?

Lets learn and understand a bit about Rights Entitlement.
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— NSEIndia (@NSEIndia) February 27, 2022

One can trade Right entitlement on the NSE Equity market trading platform. The settlement guarantee will be provided for trades and settlement shall be compulsorily done in dematerialised mode.

In case, Rights Entitlements are neither subscribed nor renounced on or before the issue closing date, they are lapsed post closure of the issue and the ISINs linked to these Rights Entitlements will stand suspended.

Trading details about Rights Entitlement

These are some important trading related details that the interested investors must know about Rights Entitlements:

1) Market Type- Normal
2) Book Type- Regular Lot (RL), Stop Loss (SL)
3) Series available for trading- BE and BL
4) Lot size- 1 share
5) Order Type- Day, Immediate or Cancel (IOC), Market & Limit Order
6) Price steps- As per parent stock’s steps
7) Price band- +/- 40 per cent

Rights entitlement would be traded on the Equity market segment of NSE.

In case of further queries and details, the interested individuals can login to the official website of NSE at nseindia.com.