Gaining a clear understanding of the rights issue allotment process can help investors track their applications and avoid confusion if shares are not fully allotted.
Once a rights issue application period ends, the next critical stages for investors involve allotment, the transfer of shares, and listing. These steps determine the number of shares you'll receive, when they show up in your demat account, and when they can be traded on the stock exchange.
Rights Issue Allotment
The rights issue allotment is the step where the company allocates the number of shares to eligible applicants. This is based on several factors:
- Their entitlement
- The quantity of applications received
- Available unsubscribed shares
- Guidelines in the Letter of Offer
After the issue ends, the Registrar to the Issue prepares the basis of allotment, which is then approved by the company’s Board of Directors in consultation with the Designated Stock Exchange. Once it's approved, shares are credited, and funds are debited through ASBA.
Rights Issue Allotment Process
The allotment process for a rights issue is designed to be fair and transparent. It is managed by the Registrar and approved by the Board of Directors, in consultation with the Designated Stock Exchange.
The Basis of Allotment document outlines how a company decides who gets how many shares after the rights issue closes. This is essential when shareholders request different amounts, including extra shares, and the issue is not completely subscribed.
The allotment procedure starts with those having the strongest claim and proceeds in a step-by-step manner.
First Priority: Shares Backed by Rights Entitlements
The highest priority is given to:
- Existing shareholders applying for shares using their Rights Entitlements (REs), either fully or partially.
- Investors (renouncees) who purchased REs from others and applied using those REs.
Second Priority: Small or Zero Entitlement Investors (if shares remain)
If there are leftover shares after addressing RE-based applications, allotment for at least one additional share is considered for:
- Shareholders whose fractional entitlement was overlooked (e.g., 0.5 shares).
- Shareholders with zero entitlement.
Third Priority: Excess Shares Applied by Existing Shareholders
If shares are still available, shareholders who fully applied for their entitlement and requested additional shares may receive some extra shares.
Fourth Priority: Excess Shares Applied by Renouncees
If surplus shares continue to be available, renouncees who applied for their full renounced entitlement and requested additional shares may receive allotment on a proportional basis.
Lastly: Any Specific or Disclosed Investors
In rare instances, if the company has disclosed a specific investor or another person approved by the Board, they may receive shares only if shares remain after addressing all above categories.
Note: Such allotment is not considered preferential, and the Board’s decision is final.
If shares are still left after all these steps, they are treated as unsubscribed rights shares. The company may let them lapse or handle them as disclosed in the offer document.
Rights Issue Allotment Timeline
Rights Issue Allotment Timeline
The typical timeline for rights issue allotment follows this sequence:
- Issue closes
- Basis of allotment is finalized
- Board resolution approving the allotment
- Credit of shares to demat accounts
- Refund/unblocking of excess application money
- Listing of rights shares on the stock exchange
The entire allotment period usually takes up to a week from the issue's closure, depending on regulatory approvals.
Rights Issue Allotment Status
Investors can check their rights issue allotment status through various methods:
- iposcanner.ai: Visit the allotment section of the specific rights issue and search using PAN, DP ID, or Client ID.
- Registrar Websites (KFintech, Link Intime, Bigshare, etc.): Search using PAN, DP ID–Client ID, or application number.
- Bank or ASBA Portal: Check if funds are debited or released.
- Demat Account: A credit of shares confirms successful allotment.
This also helps investors identify cases where a rights issue is not allotted or only partially allotted.
Credit of Rights Issue Shares
Credit of Rights Issue Shares
Once the allotment is finalized:
- Rights shares are credited directly to the demat account.
- Any excess blocked funds are released.
- Investors receive SMS/email confirmation from the registrar or depository.
At this stage, the shares are not tradable until they are listed.
Listing of Rights Issue Shares
Listing of Rights Issue Shares
- Rights issue shares are listed on the stock exchange on the listing date mentioned in the issue schedule.
- Trading starts during regular market hours.
- Shares issued under a Rights Issue are listed under the same ISIN as the existing equity shares if they are fully paid up. If the rights shares are partly paid, they are initially listed under a separate ISIN. Once the call money is paid and the shares become fully paid, they are merged and traded under the same ISIN as the existing equity shares.
- Shares become freely tradable only after listing.
- There is no separate trading segment after listing.
Once the rights issue shares are allotted and listed, investors may need to take one final step if the issue is partly paid. In such cases, companies raise the remaining amount through call money, which shareholders must pay within specified timelines to convert their partly paid shares into fully paid equity shares.
Let's now dive into what call money is, how it operates, and what investors should be mindful of in a rights issue.
Key Takeaways
- Rights issue allotment follows a priority-based and regulated process.
- Full entitlement applicants are prioritized over additional applicants.
- Shares are credited before listing but become tradable only after listing.
- Rights issue allotment generally takes about 3 to 7 working days.