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Rights Issue Renunciation

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The rights issue renunciation takes place when a shareholder wants to give up his rights and renounce in favor of other interested investors at a price.

The rights issue renunciation is the transfer of the rights entitlements by a shareholder not willing to accept the rights offer and want to renounce the shares in favour of another person.

This process of transfer or sale to another person is known as the renunciation of rights share. The person selling the rights entitlement is known as the renouncer and the person buying the rights entitlements is known as the renouncee.

With the introduction of dematerialized rights entitlements, the renunciation of rights entitlements has been made efficient and effective providing transparency in the renunciation process by way of rights entitlement trading platform on the stock exchange. The interested sellers and buyers participate in this trading window and exchange the rights at a better price driven by market forces. Earlier to this, the shareholders did not have much choice and had to either let go of their rights or transfer it to another person either free or at a much lower price. However, with the renunciation of the rights entitlement process, it provides a better opportunity to shareholders to sell their rights at a much better price rather than let it lapse as is if one is not interested to subscribe to the issue.

The renunciation of rights shares can be done either in part or full. There are two ways of renunciation:

  1. On-Market Renunciation - This is the rights entitlements trading platform of the stock exchange wherein the rights can be renounced on the exchange floor at a better price. The on-market renunciation can happen only till the last date of the rights entitlement trading which is generally 3-4 working days before the issue closing date.
  2. Off-market renunciation - In this case, the interested buyer and seller can mutually agree on the price and complete the renunciation off-market. The off-market renunciation can be done until the issue closure date however it should be done in such a way that the renouncee has sufficient time to apply for the rights issue before the issue closure date.
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Frequently Asked Questions

  1. 1. What is renunciation of rights shares?

    The renunciation of rights share is the process of renouncing or transferring or selling the rights to other interested investors at a better price.

    When a shareholder is not interested in the rights issue offer given by the company, he can choose to renounce his rights rather than let it lapse. The renunciation of rights share can happen either by way of rights entitlement trading or off-market transfer.

     

  2. 2. How do I renounce my rights?

    The rights shares can be renounced by participating in the rights entitlement trading platform of the stock exchange known as an on-market renunciation or by way of off-market transfer known as off-market renunciation.

    In the case of on-market renunciation, the settlement of rights entitlement happens similar to equity stock on T+2. The on-market renunciation can offer better pricing opportunities based on the demand and supply of the RE in the market.

    In the case of off-market renunciation, the pricing will be decided mutually by both parties. The off-market renunciation can be done till the issue closure date, unlike on-market renunciation which closes 3-4 before the issue closure date.

     


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