What is a rights issue in India?
Quick Answer: A rights issue offers new shares to a company's existing shareholders in proportion to what they already own. In India, SEBI requires a listed company to complete it within 23 working days of board approval. Shareholders get tradable rights entitlements in demat and can apply, transfer them or let them lapse.
A rights issue lets a listed company raise fresh money from the people who already own it, before anyone else. Each shareholder is offered new shares at a price the board fixes, in a ratio such as one new share for every four owned.
India's version has one distinctive feature. The rights entitlement is a separate security credited to the demat account that can be traded on the exchange. The sections below cover the law, the timeline, applying and a worked example.
What is a rights issue?
A rights issue is a fresh issue of shares offered first to existing equity shareholders, in proportion to their paid-up capital. Section 62(1)(a) of the Companies Act, 2013 makes this the default route when a company issues further shares.
Shareholders offered rights have three choices: subscribe and pay the issue price, renounce the right in favour of someone else, or do nothing. Where a shareholder does nothing, the company's share count rises and that person's percentage of ownership falls. Outsiders can take part only by acquiring rights entitlements from shareholders who renounce them, or as specific investors the issuer names for any unsubscribed portion.
How do rights entitlements work in India in 2026?
In India in 2026, rights entitlements (REs) are credited to eligible demat accounts under a separate ISIN before the issue opens. The credit is based on shares owned on the record date, as set out in SEBI's ICDR master circular, last updated on 9 February 2026.
Like equity shares, REs trade on the stock exchanges with T+1 settlement, starting when the issue opens and stopping at least three working days before it closes. An off-market transfer is the other way to renounce. Both routes settle through the depositories.
Fractions are rounded down, so an entitlement that works out to 250.5 REs becomes 250. REs that are neither renounced nor used to apply lapse at closure. Once allotment is done, the depositories extinguish them. Shareholders who still keep physical certificates must give the registrar their demat details at least two working days before the issue closes, so their REs can be credited in time.
What is the rights issue process?
Listed rights issues have 23 working days, counted from board approval, to reach completion. The rule, in SEBI's circular of 11 March 2025 on faster rights issues, covers issues approved by boards from 7 April 2025.
Indicative rights issue timeline, T = date of board approval (SEBI circular SEBI/HO/CFD/CFD-PoD-1/P/CIR/2025/31, Annexure I; as of 22 September 2026)
| Step | Working day |
|---|---|
| Board approves the rights issue | T |
| In-principle approval from stock exchanges | T+3 |
| Second board meeting fixes record date, price and ratio | T+4 |
| Record date | T+8 |
| Rights entitlements credited to demat | T+9 |
| Issue opens and RE trading begins | T+14 |
| RE trading on the exchange closes | T+17 |
| Off-market RE transfers close | T+19 |
| Issue closes | T+20 |
After closure a second clock starts. The RE ISIN is suspended on the closing day, the basis of allotment is approved one working day later, and the new shares begin trading on the third working day after closure.
An issue must stay open for at least 7 days and at most 30 days. Under the same circular, an issuer can also name specific investors in advance who may be allotted any unsubscribed portion.
How do I apply for a rights issue?
Applications for a rights issue go only through ASBA under SEBI's 2026 ICDR master circular. The bank blocks the money instead of debiting it upfront.
An investor needs REs in the demat account when applying. They can come from the original credit or be acquired on the exchange before RE trading closes, and the application then goes through the ASBA facility of a self-certified syndicate bank, for up to the number of shares the REs allow.
After the application, two rules matter. No application can be withdrawn once the issue closes, and if the issue misses its minimum subscription, which ICDR regulation 86 sets at 90% of the offer with limited exceptions, all application money must be refunded within four days of closure.
To see which companies have a rights issue under way, Multibagg's corporate actions page lists announced rights issues next to splits, bonuses and buybacks.
What does the Companies Act 2013 say about rights issues?
Section 62(1)(a) of the Companies Act, 2013 requires a notice keeping the offer open for 15 to 30 days. The Act allows a shorter minimum to be prescribed, and SEBI's framework for listed issues uses 7 days.
Every shareholder also gets a right under the same clause to renounce the shares offered, unless the articles say otherwise, and the notice must state that right. Once the offer period ends, the board may dispose of unaccepted shares in a way that is not disadvantageous to the shareholders and the company.
Section 62(2) deals with delivery, requiring the notice to reach all existing shareholders at least three days before the issue opens, by registered post, speed post, courier, electronic mode or another mode with proof of delivery.
Rights issue vs bonus issue: what is the difference?
The core difference is cash: rights shares are paid for, while bonus shares come free from reserves under section 63. That section allows bonus shares only out of free reserves, the securities premium account or the capital redemption reserve, and bars issuing them in lieu of dividend. A bonus raises no money and keeps every percentage stake unchanged automatically, whereas a rights issue raises money and a shareholder keeps the same percentage only by paying to subscribe.
Participation is another point of difference. A bonus is credited to every eligible shareholder without any action, while a rights issue needs an application and unused entitlements lapse.
What is a rights issue with an example?
Take a hypothetical company with 1 crore shares announcing 1 new share for every 4 owned, at ₹150 per share. It would issue 25 lakh new shares, taking the total to 1.25 crore.
Hypothetical 1-for-4 rights issue at ₹150, shareholder with 1,000 shares (illustration only, not any real company; as of 22 September 2026)
| Choice | Shares after issue | Cash paid | Share of the company |
|---|---|---|---|
| Apply for all 250 entitlements | 1,250 | ₹37,500 | 0.0100% (unchanged) |
| Renounce the 250 REs on the exchange | 1,000 | Nil | 0.0080% |
| Do nothing, REs lapse | 1,000 | Nil | 0.0080% |
The shareholder starts with 0.0100% of the company, and applying keeps that stake intact. Renouncing and doing nothing both shrink it to 0.0080%. Renounced REs fetch whatever the exchange pays for them, while lapsed REs bring nothing.
That ₹150 price is invented for the arithmetic and says nothing about how any listed share trades. For real ratios and issue sizes, see our notes on Esaar (India)'s rights issue, Natco Pharma's exchange approvals for its rights issue and Quint Digital's 2026 rights issue.
Rights issue record dates and alerts
In SEBI's timeline, the record date falls just 8 working days after board approval, which is a short interval. That short window is why Multibagg Alerts carries corporate-action events for followed stocks. Our guide to tracking corporate actions shows where rights issues appear on NSE's and BSE's corporate action lists.
Disclaimer: This article is for educational and informational purposes only. Multibagg AI is not a SEBI-registered investment adviser or research analyst, and it does not provide investment, financial, legal or tax advice. Nothing here is a recommendation to buy, sell, hold or invest in any security. Market data is shown as of the dates stated and may have changed since. Please consult a SEBI-registered adviser before making any investment decision.
Aaditya Aanand is the founder and CEO of Multibagg AI. An IIT Kanpur alumnus, he has worked across technology and financial markets at Goldman Sachs and American Express. His writing explores investing, markets and AI.