Every investment needs a lot of homework to decide on the course of action and this is true especially for the shareholders of Reliance Industries as they ponder the choices before them in the rights issue.The situation under which the issue is being made plus the features of the issue requires investors to have a deeper knowledge of options and its implications as these are different here from a normal rights issue.Rights IssueA rights issue is one where the company offers new shares to the existing shareholders. So in effect if you are an existing shareholder of the company then you automatically get the right to subscribe to the additional shares.Usually, the rights issue is at a discount to the market price and this is an attraction for the shareholders to put money to buy the additional shares.In this case the shareholders of Reliance Industries can participate in the rights issue from 20 May 2020 to 3 June 2020.Ratio and Fractional SharesThere is always a ratio in which the new shares are offered to the existing shareholders. This is mentioned in terms like 1:2 or 1:10, Here the first number means the number of new shares being offered and the second number is the existing holding for which the new shares are being offered. For example 1:10 ratio means that 1 share is offered for every 10 held.In the case of Reliance Industries the ratio is 1:15 which means that the investor get 1 additional share for every 15 held.IMF Lauds Govt’s Stimulus Package, Says India Needs Policy ActionIt is likely that every investor will not have the exact multiple of 15 shares and in some cases many investors would not even have 15 shares. In such a situation the investor would get the rights only to the extent of the completion of 15 shares.The fractional entitlement would be ignored. For example if an investor has 32 shares then they would be eligible for 2 shares for the first 30 held and the remaining 2 shares out of 32 would be ignored. Similarly, if an investor has 11 shares they would not be entitled to any share under the rights issue.The only concession for the investor is that if they apply for an additional share for the fractional entitlement not allowed then they would be eligible for priority allotment if shares are available.Partly Paid SharesNormally the entire amount of the rights issue has to be paid at the time of subscription to the issue. However, companies can decide to call up the total amount in instalments. This is what is being done in the case of Reliance Industries where there is 25 percent being called up initially and the rest will be called up later.This means that while the total issue price is Rs 1,257, the investor just has to pay Rs 314.25 at the time of the subscription to the rights. This makes the shares partly paid up because the full amount has not been called on the issue.The investor should also realise that there will be a difference in which they can sell the shares once they get allotment in the rights issue. The existing shares of Reliance Industries are fully paid up shares and these should not be compared to the partly paid ones. There will be separate trading of the partly paid shares and these will have a different traded price.Those investors who are looking to sell the shares before they are fully paid up need to focus on the partly paid traded price as this will be the relevant price for them.For the long term investors it is the traded price of Reliance Industries that matters ultimately because if they are going to subscribe to the full amount and hold the shares then their cost will be Rs 1257 on which their returns would be calculated.Rights EntitlementInvestors who get the offer for the rights shares which is also called the rights entitlement can do several things with this. They can subscribe to the right issue in full. In addition they can apply for some extra shares too if they want. This however will be allotted only if there is room left if otherinvestors have not subscribed to the issue. But one can always try. At the same time there are some investors who might not want to invest and they can even sell their rights entitlement which is called renouncing their rights in favour of someone else. For the first time trading of the rights entitlement will be done on the stock exchange wherein an investor can sell these just like a normal share.The trading would be done between 20 May 2020 and 29 May 2020. Here this would be a situation where the investor can look to earn returns even without subscribing to the rights issue.‘Dramabaazi’: Nirmala on Rahul Meeting Migrant Workers in DelhiOn the other side this means that if you are not an existing shareholder of Reliance Industries then you can still invest if some investor renounces the rights in your favour or you buy the rights entitlement from the stock exchange. The pricing of the rights entitlement is tricky so this has to be seen and analysed in detail.An investor can partly invest to the rights issue and renounce the rest so this is also possible which shows that there are a range of options for the investor to choose from,Bigger PictureInvestors need to look at the whole picture before they make a final decision because of the large number of choices in front of them. Depending on their holding period they need to frame a separate strategy. There is a future payment that would come on the investor to the extent of investing the remaining of the money that would be called up to make the shares fully paid up. For long term investors its the future growth potential of the company that matters the most.(Arnav Pandya is Founder of Moneyeduschool. )Modi Must Get India Out of COVID Mess to Make Foreign Policy Work We'll get through this! 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