Corporate Action

  • What is corporate action?

    • Corporate actions are actions taken by a company that impact the shareholders value directly. It is an event that brings material changes to a company and affects its stakeholders.
    • These may be either monetary e.g. dividend, or non-monetary e.g. Bonus, rights, or stock splits.
  • What are the types of corporate action?

    The different types of corporate actions announced by a company are:
    • Rights issue
    • Dividend
    • Stock Split
    • Conversion of debentures into shares
    • Amalgamation
    • Merger
    • Demerger
    • Capital reduction / Consolidation of shares
    • Buy Back
    • Bonus
    • Open Offer
  • From where will I get information about any corporate action announced by a company?

    Corporate actions are communicated to the shareholders by the Company. However, if you are not a shareholder, the corporate action details can be accessed from the NSE and BSE. You can visit below websites to get further details:
  • Can I check the Corporate Announcements on the IIFL website?

    Yes, you can check the details from IIFL website. Please follow the below mentioned steps:
  • What is meant by Rights Issue?

    When a company wants to raise capital, issue of fresh shares to the existing shareholders is one option available to the company. In such an issue, existing shareholders have the right to buy a specified number of new shares of the company at a specified price within a specified time. Usually this price is below the market price. The idea is to reward existing shareholders with an investment opportunity, which is perceived to be attractive.
  • What is meant by Dividend?

    Simply defined, Dividend is the portion of profit of a company, distributed to its shareholders.
  • What is meant by stock split?

    • A company increases the number of shares that are outstanding by issuing more shares to existing shareholders. For example, in a 2-for-1 stock split, every shareholder holding one share is given an additional share. In such a case, the face value of the share is reduced (say from ` 10 to 5 per share).
    • Companies stock's price is also affected by a stock split. After a split, the stock price of the company reduces since the number of outstanding shares increases, however the market capitalization remains the same.
  • What is meant by Consolidation?

    • A consolidation is an Exchange of existing shares for a fewer number of the same share type with an increase in the nominal value per share maintaining the company’s overall share capital. This means that although your shareholding is reduced, you do not lose any value as the market price of the shares will increase accordingly.
    • A company would issue a consolidation (reverse stock split) to increase the share price because they feel it would be more marketable at a higher price. The nominal value of each share is adjusted to maintain an equal total share capital as before the consolidation. The new shares are issued free of all charges to shareholders. On the effective date of the consolidation the price per share is adjusted to take into account the reduced number of shares in issue.
  • What is amalgamation?

    An amalgamation is the process by which two or more companies or legal persons merge into a single entity.
  • What is merger?

    The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in Exchange for the surrender of their securities.
  • What is demerger?

    • Demergers are situations in which divisions or subsidiaries of parent companies are hived off into independent corporations.
    • The process for a demerger can vary depending on the reasons behind the implementation of the split.
    • Generally, the parent company maintains some degree of financial interest in the newly formed corporation, although that interest may not be enough to maintain control of the new corporate entity.
  • What is Buy- Back?

    Offer by issuing company to existing shareholders to repurchase the company’s own shares or other securities convertible into shares.  This results in a reduction in the number of outstanding shares.
  • What is Bonus?

    A bonus share is a free share of stock given to current shareholders in a company, based upon the number of shares that the shareholder already owns. While the issue of bonus shares increases the total number of shares issued and owned, it does not change the market capitalization of the company.
  • What is meant by Open offer?

    • Acquirer offer to purchase particular company’s shares from existing shares holder at pre-decided price, accordingly public announcement & letter of offer issued to all existing shares holder wherein details of Escrow demat a/c mentioned in the same.
    • Open offer is for particular period which is also mentioned in the letter of offer.
  • What is the eligibility of the corporate action?

    • Let us understand the meaning of different important dates for corporate actions:
      • Declaration Date: This is the date on which the board of directors announces to shareholders and the market as a whole that the company will pay a dividend.
      • Ex Date: This is the date on which security trades without the benefit of Corporate Action .An investor buying security on or after the ex-date is not eligible for the Corporate Action by the Company.
      • Record Date: This is the date on which the company looks at its records to see who are the shareholders of the company entitled for the Corporate Action.  An investor holding shares on record date will be eligible for the  Corporate Action
      • Date of payment:This is the date on which the company mails out the Corporate Action to the holder of shares on the record date. This date is generally a week or more after record date so that the company has sufficient time to ensure that it accurately pays all those who are entitled.
    • Below is the table which will tell on who is eligible for the corporate action:
      Before Ex Date On Ex Date After Ex Date
      Buyer Eligible Not eligible Not eligible
      Seller Not eligible Eligible Eligible
    • Hence if you are holding shares in trading (pool)/demat account on or before record date irrespective of debit or credit balances in your trading or demat account; you are eligible for corporate benefits.
  • Does corporate action of equity have an impact on derivatives segment?

    In derivatives segment, only lot size, price and/or strike price (as the case may be) of the scrip is changed by the Exchange. There is no corporate benefit received by customer in any form.
  • How will I receive the benefits of corporate actions such as dividend/rights/bonus?

    • Shares lying in demat account:
      You will receive shares/ dividend/ bonus/ interest directly from the company's registrar into your bank account/ demat account or through cheque/ DD.
    • Shares lying in trading/ pool account:
      You will receive shares/ dividend/ bonus/ interest from broker where you hold a trading and a demat account.
  • What is Registrar & Transfer Agent of Company (RTA)?

    An entity contracted to keep a record of the owners of stocks and bonds issued by the company.
  • From where to get the RTA details?

    • Visit www.nseindia.com » Enter Company Name» Click on Company Information» Company Contact Details
    • Visit www.bseindia.com » Enter Company Name» Click on Corp Information
  • What is the procedure to receive corporate benefits if shares are lying in demat account?

    You will receive benefits directly from the company. You need to contact RTA of the company if shares/ credit/ interest are not received in your account.
  • What is the procedure to receive corporate benefits if shares are lying in pool account?

    • You will receive benefits through your broker where you have your demat and trading account.
    • In case you have not received the benefits, you can call on 022-40071000 or write us at cs@indiainfoline.com.
  • Whom should I coordinate to know if I am eligible for corporate benefit?

    You can contact to the RTA of the Company.
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