How does Rights Entitlement (RE) work?

Rights Entitlement (RE) is a temporary credit received in your demat account when a company announces a rights issue. It gives you the right—but not the obligation—to apply for new shares.

Below are the simple steps that explain the working of RE.

• If you hold shares on the record date, REs get credited to your demat account in proportion to the rights ratio.
• You can use REs to apply for rights shares, sell (renounce) them in the market, or buy additional REs to apply for more shares.
• REs are tradable only for a limited period and will expire if no action is taken.
• If you apply successfully, the REs convert into equity shares upon allotment.