CIRCULAR

SEBI/HO/CFD/DIL2/CIR/P/2020/13 January 22, 2020

To

Recognized Stock Exchanges

Depositories
Registered Stock Brokers
Registered Merchant Bankers
Registered Registrars to an Issue and Share Transfer Agents
Registered Depository Participants
Registered Bankers to an Issue

Dear Sir / Madam,

Sub: Streamlining the Process of Rights Issue

1. The Securities and Exchange Board of India (SEBI), has simplified the rights issue
process to make it more efficient and effective, by amending the SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) and
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR
Regulations”). Accordingly, following changes are made with respect to the Rights Issue
process :

1.1. The period for advance notice to stock exchange(s) under Regulation 42(2) of
LODR Regulations has been reduced from at least 7 working days to at least 3
working days (excluding the date of intimation and the record date), for the purpose
of rights issue.

1.2. Issuance of newspaper advertisement disclosing date of completion of dispatch and

intimation of same to the stock exchanges for dissemination on their websites, as
per Regulation 84 (1) of ICDR Regulations, shall be completed by the issuer at least
2 days before the date of opening of the issue.

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1.3. Introduction of dematerialized Rights Entitlements (REs) –

1.3.1. In the letter of offer and the abridged letter of offer, the issuer shall disclose
the process of credit of REs in the demat account and renunciation thereof.

1.3.2. REs shall be credited to the demat account of eligible shareholders in

dematerialized form.

1.3.3. In REs process, the REs with a separate ISIN shall be credited to the demat
account of the shareholders before the date of opening of the issue, against the
shares held by them as on the record date.

1.3.4. Physical shareholders shall be required to provide their demat account details
to Issuer / Registrar to the Issue for credit of REs not later than two working
days prior to the issue closing date, such that credit of REs in their demat
account takes place at least one day before the issue closing date.

1.4. Trading of dematerialized REs on stock exchange platform -

1.4.1. REs shall be traded on secondary market platform of Stock exchanges, with
T+2 rolling settlement, similar to the equity shares. Trading in REs on the
secondary market platform of stock exchanges shall commence along with the
opening of the issue and shall be closed at least four days prior to the closure
of the rights issue.

1.4.2. Investors holding REs in dematerialized mode shall be able to renounce their
entitlements by trading on stock exchange platform or off-market transfer. Such
trades will be settled by transferring dematerialized REs through depository
mechanism, in the same manner as done for all other types of securities.

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 1.5. Payment mode - Application for a rights issue shall be made only through ASBA
facility.

1.6. No withdrawal of application shall be permitted by any shareholder after the issue
closing date.

2. The detailed procedures on the Rights Issue process are given at Annexure I for due
compliance.

3. This circular shall be applicable for all rights issues and fast track rights issue where
Letter of Offer (LoF) is filed with the stock exchanges on or after February 14, 2020.

4. All entities involved in the Rights Issue process are advised to take necessary steps to
ensure compliance with this circular including the procedures stated at Annexure I of
this circular.

5. This circular is being issued in exercise of the powers under section 11 read with section
11A of the Securities and Exchange Board of India Act, 1992.

6. This circular is available on SEBI website (www.sebi.gov.in) under the categories

“Legal Framework / Circulars”.

Yours faithfully,

Amy Durga Menon

Deputy General Manager

Corporate Finance Department

+91 22 2644 9584

Email - amydurga@sebi.gov.in

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 Annexure I

Procedures on the Rights Issue process

A. Application Form
a. The issuer shall dispatch a common application form to its shareholders as
on the record date. Along with application form, the issuer shall also send the
details of the rights entitlements of the shareholder separately.
b. This application form can be used both by shareholder or renouncee.
c. Registrar to the issue shall also upload the application forms on its website.
d. Applicants can use application form available on the website of registrar to
the issue or printed forms sourced from the issuer, merchant bankers or
registrars to the issue.
e. In terms of Regulation 78 of the ICDR Regulations, investor also has option
to make an application in writing on a plain paper.

B. Credit of Rights Entitlements (“REs”) in dematerialized form

a. The depositories shall put necessary procedures in place for issue and credit
of REs in demat mode.
b. The issuer making a rights issue of specified securities shall ensure that it
has made necessary arrangements with depositories to issue and credit the
REs in demat mode in the demat accounts of shareholders holding shares as
on the record date.
c. A separate ISIN shall be obtained by the issuer for credit of REs.
d. Issuer shall specify the ISIN for REs while announcing the record date.
However, for issues where the record date is announced before February 14,
2020, and the letter of offer is filed with the stock exchanges on or after
February 14, 2020, the Issuer shall file the letter of offer with the stock
exchanges only after it has obtained ISIN for REs.
e. Based on the rights entitlement ratio, the issuer shall credit REs in
dematerialized mode through corporate action to shareholders holding

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 shares as on record date. The ISIN of REs shall be kept frozen (for debit) in
the depository system till the date of opening of the issue.
f. Physical shareholders shall be required to provide their demat account details
to Issuer / Registrar to the Issue for credit of REs not later than two working
days prior to issue closing date, such that credit of REs in their demat account
takes place at least one day before issue closing date.
g. In case of fractional entitlements of REs, the fractional part shall be ignored
by rounding down the entitlement.
h. The issuer shall submit details of total REs credited to the stock exchanges
immediately after completing the corporate action for the same and shall
obtain requisite trading approval from the stock exchanges.
i. The details with respect to shareholder entitlement shall be made available
on the website of the Registrar to the issue and the investors shall be able to
check their respective entitlements on the website of the Registrar by keying
their details, after adequate security controls to ensure that investors’
information is made available only to the particular investor. Issuer shall also
carry these links on their website.
j. If the demat account of a shareholder is frozen or demat account details are
not available, including shares held in unclaimed suspense account or in the
account of IEPF Authority, then REs shall be credited in a suspense escrow
demat account of the Company and an intimation should be sent to such
shareholder by the issuer /Registrar to the issue.
k. The issuer shall intimate issue closing date to the depositories at least one
day before the issue closing date, and the depositories shall suspend the ISIN
of REs for transfers, from issue closing date.
l. REs which are neither renounced nor subscribed by the shareholders, shall
be lapsed after closure of the Rights Issue.
m. Issuer Company shall ensure that REs which are lapsed are extinguished
from the depository system once securities are allotted pursuant to Rights
Issue. Once allotment is done, the ISIN for REs shall be permanently
deactivated in the depository system by the depositories.

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C. Renunciation process and trading of REs on stock exchange platform:
a. The stock exchanges shall put necessary procedures in place for trading of
REs on stock exchange platform.
b. REs credited to demat account can be renounced either by sale of REs using
stock exchanges platform or off-market transfer and such trades will be
settled by transferring dematerialized REs through depository mechanism in
the same manner as done for all other types of securities.
c. For sale of REs through stock exchange, investors can place order for sale
of REs only to the extent of REs available in the demat account of the
investor. Trading in REs on the secondary market platform of Stock
exchanges will happen electronically on T+2 rolling settlement basis where T
being the date of trading. The transactions will be settled on trade-for-trade
basis.
d. Issuer shall inform the dates of issue opening and closing to the stock
exchanges and the depositories at the time of filing the letter of offer with the
stock exchanges.
e. Trading in REs shall commence on the date of opening of the issue and shall
be closed at least four days prior to the closure of rights issue.

D. Submission of Application form in Rights Issue

a. All investors (including renouncee) shall submit application forms using ASBA
facility through the Self Certified Syndicate Banks (SCSB) network during the
issue period.
b. Investor shall submit only one application form for REs available in a
particular demat account.

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E. Allotment process in the rights issue
a. Facility for correction of bid data as collated by the SCSBs after issue closing
shall be provided for period of one day i.e. on next working day after issue
closing.
b. Registrar shall obtain demographic details of all applicants from depositories.
c. Registrar shall obtain details of holders of REs as on issue closing date, from
the depositories.
d. After reconciliation of valid ASBA applications, funds blocked and REs demat
holding list, the registrar shall finalise allocation of securities offered through
rights offering.
e. Registrar shall credit the shares to the respective demat accounts of the
applicants based on basis of allotment approved by the designated stock
exchange and shall issue instructions to unblock bank accounts wherever
necessary.

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