Special Services - Public Offering / Corporate Actions: formula sheet

Key formulas

Agreements needed

Issuer + RTA + depository (NSDL and CDSL) → tripartite agreements

Without these agreements the security cannot be admitted and the issue cannot be made in demat form.

ISIN

ISIN = unique 12-character code per security

One ISIN per security, common to both depositories. It is activated before credit of allotment.

Allotment credit flow

Basis of allotment → RTA sends credit file → depository credits BO accounts via DPs

Credit goes only to the BO ID given in the application. A wrong or inactive demat account causes failure.

Investor requirement

Demat account (BO ID) needed to apply for allotment in electronic form

Details are taken from the application and matched with depository records.

Roles split

Depository = admission, ISIN, credit | Issuer/RTA = allotment decision | Exchange = listing and trading

Use this to eliminate options that give the depository allotment or pricing duties.

Bonus shares received

Shares received = Holding × (bonus ratio). For 1:2 bonus, new shares = Holding ÷ 2

1:2 means 1 new share for every 2 held. Total after bonus = holding + new shares.

Stock split

New shares = Old shares × (Old face value ÷ New face value)

Face value falls, number of shares rises. Example: ₹10 to ₹2 gives 5 shares for every 1.

Rights entitlement

Rights shares = Holding × (rights ratio). For 1:4, entitlement = Holding ÷ 4

Amount payable = rights shares taken × rights issue price.

Dividend amount

Dividend = Shares held on record date × dividend per share

Dividend is declared per share, often as a percentage of face value.

Record date and ex-date

Buy before ex-date = entitled. Buy on or after ex-date = not entitled

Entitlement is based on the BO holding on the record date.

Nature of benefit

Cash: dividend, interest. Non-cash: bonus, split, rights entitlement

Non-cash benefits are credited by the depository to the BO's demat account.

Rights entitlement ratio

REs credited = (Shares held on record date ÷ Shares in ratio base) × New shares in ratio, rounded as per the offer document

For a 1:4 ratio, a holding of 100 shares gives 25 REs. Fractions are dealt with as the offer document states.

Application money

Amount payable = Number of shares applied for × Issue price per share

Issue price may be payable in full or in part as per the terms. Check the terms.

Entitlement rule

Eligibility = Holding in demat account on record date

Only holders on the record date get REs. A later purchase does not give REs for that issue.

Choices for REs

Subscribe | Renounce (on-market or off-market) | Lapse

Unused REs lapse after the issue closes.

Swap ratio effect

New shares = Old shares × Entitlement ratio (rounded as per the scheme)

Example: ratio 3:5 means 3 new shares for every 5 old. Fractions are handled as the scheme says, often by paying cash for fractional entitlements.

Merger entry

Debit old ISIN (transferor) → Credit new ISIN (transferee)

Processed on the issuer or RTA's instruction after the scheme becomes effective. The old ISIN is deactivated and closed at that time.

Demerger entry

Original holding unchanged + Credit of resulting company shares

Nothing is debited from the original holding in a pure demerger.

Buyback entry

Tendered shares (exchange mechanism): Debit investor account → Credit clearing corporation's designated account (early pay-in) → accepted shares extinguished, unaccepted shares returned

Only accepted shares are extinguished. For a delisting offer, follow the mechanism in the offer document.

Record date rule

Entitlement depends on holding at close of record date

Check the date given in the question.

Entitlement rule

Benefit goes to holders whose names appear as beneficial owners on the record date

Holding on the record date decides entitlement, not the date of the announcement.

Information flow

Issuer → record date → depository gives holding data to issuer/RTA → issuer/RTA processes → file to depository → electronic credit to demat accounts

Use this sequence to order steps in any question.

Bonus or split holding (illustration)

New holding = Old holding × (1 + bonus ratio), e.g. 1:1 bonus doubles the holding

A split changes face value and number of shares. A bonus changes the number of shares without changing the investor's total investment.

Unclaimed items

Credit not possible → held in a separate suspense account of the issuer/RTA → released on valid claim

Check the workbook for the exact time limits and transfer rules.

Quick revision

• The issuer decides corporate actions; the depository and DPs execute the credit to holders.
• The RTA works for the issuer and coordinates with the depository on corporate benefits.
• The record date fixes who is entitled to a corporate benefit.
• Securities in a public offering are credited to the investor's demat account in electronic form.
• Dividend is a cash benefit; bonus and split change the number of shares held.
• A split changes the face value and the number of shares, not the total value held.
• Bonus shares are issued to existing holders in a ratio set by the issuer.
• A rights issue offers existing holders the chance to subscribe; entitlements can be renounced.
• Rights entitlements are credited electronically to the holder's demat account.
• In mergers and demergers, holdings are credited according to the approved scheme.
• Buyback and delisting involve the issuer and exchange rules; the depository processes the resulting holding changes.
• Check the workbook for exact timelines before the exam; never guess a limit.

Common mistakes

• Saying the depository allots shares to applicants. Fix: The issuer decides allotment with the RTA and registrar. The depository only credits the securities to BO accounts.
• Thinking an issuer must deal with only one depository. Fix: Issuers sign agreements with both NSDL and CDSL so investors can choose either one.
• Treating bonus and split as the same thing Fix: Bonus: face value unchanged, reserves capitalised, share capital rises. Split: face value falls, share capital unchanged.
• Saying a buyer on the ex-date gets the dividend Fix: Buying on or after the ex-date gives no entitlement. You must have bought before it.
• Treating a rights issue like a bonus issue Fix: Remember that rights shares are paid for and the holder can decline; bonus shares are free and come from reserves.
• Thinking buying shares after the record date gives REs Fix: REs go only to those holding on the record date. A later buyer does not get them.
• Saying the depository decides the swap ratio or approves the scheme. Fix: The company and regulators decide terms. The depository only executes the instructions it receives.
• Debiting the original shares in a demerger. Fix: In a demerger the existing holding stays and extra shares of the resulting company are credited.
• Saying the depository decides who gets the benefit. Fix: The issuer fixes the entitlement and the record date. The depository supplies holding data and credits as instructed.
• Linking entitlement to the announcement date or the payment date. Fix: Remember only the record date matters for deciding who is entitled.

Exam tips

• Link each action to its actor: depository (admission, ISIN, credit), issuer and RTA (allotment), exchange (listing and trading).
• Expect order-of-events questions. Memorise: agreements, ISIN, allotment, credit, listing.
• Watch for options saying the depository fixes price or decides allotment. They are wrong.
• Remember that a demat account is required to receive allotment in electronic form, and the ISIN is common to both depositories.
• Under negative marking, skip only when two options both fit the stage and the actor. Otherwise use elimination and answer.
• Learn the cash versus non-cash split. Questions often ask which benefit the depository credits to the demat account.
• Read the date in the question: record date holding decides entitlement, not the holding today.
• For ratio sums, write the ratio in words first, such as '1 for every 2', then calculate.