RIL mega issue to put SEBI's 'rights entitlement' platform to test
Earlier this year, SEBI has introduced a platform for trading Rights Entitlement (RE). The platform allows eligible shareholders to renunciate their shares for a price. Industry players say in the case of Reliance Industries Ltd. (RIL), the shareholders can look to earn profit by as much as 15 percent of the value of eligible shares.
Actually, in case of the right issue, the shares are first offered to the existing shareholders of the company. The existing shareholders have a choice either to purchase the shares offered to them or to renounce (transfer) them to any other person. Until now, the shareholders, who didn’t wish to apply, had to let their RE lapse or had to transfer it for free. Now, the right entitlement can be sold for money.
Further, given the diverse shareholding in RIL, one can expect the rights entitlement trading platform to be fairly liquid. The trading will happen as it does in any other share. However, participants will not be allowed to trade intra-day. RIL shareholders will be able to apply for one share in the rights issue for every 15 shares held as on May 14, 2020.
The yield eligible shareholders can generate will depend on the differential between RIL’s share price in the secondary market and the rights issue price.
Exchange officials and brokers said systems have been put in place for trading in rights entitlement. The dematerialized (Demat) accounts of eligible shareholders have been credited with a new international securities identification number (ISIN), which will act as separate security and can be traded on the exchange platform.
