In the Indian stock market, a corporate action (CA) is an event initiated by a company that brings about a material change to its securities, impacting shareholders and potentially affecting stock prices. These actions can be mandatory (like bonus issues) or voluntary (like rights issues), and can be either monetary (like dividends) or non-monetary (like stock splits).
A corporate action is an event or activity undertaken by a company that has a direct impact on the value of its securities (shares or bonds) held by its investors.
Initiation: These actions are typically initiated by the company's board of directors and require shareholder approval in some cases
Impact: Corporate actions can lead to changes in the number of shares held by investors, the value of those shares, or the amount of cash received as dividends or interest.
Mandatory vs. Voluntary:
Mandatory: These actions are automatically applied to all shareholders, such as bonus issues and stock splits.
Voluntary: These actions require shareholders to take action, such as rights issues.
Types of Corporate Actions:
Monetary:
Dividends: A portion of a company's profits distributed to shareholders.
Stock Split: Offering new shares to existing shareholders at a discounted price.
Rights Issue: Issuing additional shares to existing shareholders, typically from company reserves.
Buyback: A company repurchases its own shares from the market.
Mergers and Acquisitions: Combining or acquiring other companies.
Spin-offs: Separating a subsidiary or business unit into a new, independent company.
Carve-outs: Selling a portion of a subsidiary or business unit to the public or a private investor.
How would I get my dividend / interest or other cash entitlements?
To receive your dividend, interest, or other cash entitlements, check your bank account statement for direct credits or watch for physical warrants in the mail, depending on the company's payment method.
Direct Credit: Many companies use Electronic Clearing Service (ECS) or direct deposit to credit dividends directly into your bank account. Check your bank account statements for any credits corresponding to dividend payments.
Dividend Warrants: Some companies issue physical warrants (checks) for dividend payments. You'll need to deposit these warrants into your bank account.
NSDL's Role: If your shares are held in dematerialized form, NSDL (National Securities Depository Limited) will distribute dividends on behalf of the company.
Company's Registrar and Transfer Agent (RTA): The company's RTA is responsible for crediting dividends to your bank account linked to your demat account.
Bank Account Details: Ensure your bank account details are updated in your demat account, as the dividend will be credited to the bank account specified in your account opening form or any subsequent changes.
Dividend Reinvestment Plans (DRIPs): Some companies offer DRIPs, which automatically reinvest your dividends into more shares of the company.
Record Date: Be aware of the record date, which is the date a company determines who is eligible to receive a dividend. You must own the stock on or before the record date to be entitled to the dividend.
Ex-Dividend Date: The ex-dividend date is the date when the stock price drops by the amount of the dividend. If you purchase the stock after the ex-dividend date, you will not be eligible for the dividend.
How would I get my bonus shares or other non-cash entitlements?
The concerned company obtains the details of beneficiary holders and their holdings from NSDL / CDSL. Your entitlement will be credited by the company directly in your NSDL / CDSL Axis Securities Ltd Demat A/c, if you hold the shares in your demat account before the company's record date, the usualy turn around time for the company to credit the shares in your demat account is 10 to 15 days.
How will the investor confirm that bonus/rights entitlement is credited into the account?
To confirm the credit of bonus/rights entitlements, investors should check their Demat account statements and look for an allotment advice from the issuer or its Registrar and Transfer Agent (RTA), ensuring the quantity shown in the advice and statement match.
Allotment Advice: The company or its RTA will send an allotment advice to shareholders indicating the bonus/rights entitlement received.
Demat Account Statement: Investors should regularly check their Demat account statements, which will show the credit of bonus/rights shares.
Matching Quantities:Verify that the quantity of shares credited in the Demat account statement matches the quantity mentioned in the allotment advice.
Rights Entitlement (RE) Intimation: Investors may receive a Rights Entitlement (RE) intimation in their email, which is a temporary form of Demat securities.
Record Date: The company will announce a record date, and shareholders who own shares on that date will be eligible to receive the rights entitlement.
Ex-Date: Shares bought on or after the ex-date, a day before the record date, are not eligible for the rights issue.
Renunciation of Rights Entitlements: If a shareholder is not interested in the rights entitlements offer given by the company, he can choose to renounce his rights rather than let it lapse.
Trading of Rights Entitlements: Rights entitlements can be traded in the market for a very short amount of time and a very brief term before they lapse.
India
NRI
