Subscription to a rights share is the process by which existing shareholders can purchase new shares, usually at a discount, to maintain their ownership percentage. Shareholders receive rights proportionate to their current holdings and may choose to exercise the right to buy, sell the rights on the open market, or let them expire. To subscribe, an eligible shareholder must apply through the specified process, such as online via ASBA or by submitting a physical form, and pay for the new shares.
Process to subscribe to a Rights Share
- Check eligibility: You must be a shareholder on the record date to be eligible for the rights issue.
- Review the offer: Carefully read the company's offer document to understand the entitlement ratio, rights issue price, and subscription process.
- Decide on your action:
- Exercise Rights: Purchase the new shares at the discounted price.
- Sell Rights: If the rights are tradable, sell them in the open market.
- Let Rights Lapse: Do nothing, but be aware that this will dilute your ownership stake.
Apply for the issue:
- Online: Apply through your bank's ASBA (Application Supported by Blocked Amount) facility if supported.
- Offline: Submit a physical application form to a Designated SCSB (Self-Certified Syndicate Bank) branch.
- Make payment: Pay the subscription price for the number of shares you wish to purchase.
- Receive shares: After the process is complete, the new shares will be credited to your account. If you are not allotted shares, the amount paid will be refunded.
