Renounceable and Non-Renounceable Rights

In a rights issue, existing shareholders receive rights entitlements — the option to subscribe to new shares at a discounted price. These rights can be either renounceable or non-renounceable. Renounceable rights allow the shareholder to sell or transfer their rights entitlement to another investor in the secondary market if they choose not to exercise them personally — enabling shareholders to realise the economic value of the discount even if they do not wish to invest additional capital. Non-renounceable rights, by contrast, cannot be transferred or sold — shareholders must either exercise them by paying the subscription price or let them lapse without any compensation. Renounceable rights issues are more investor-friendly because they preserve the economic value of the entitlement for shareholders unable to subscribe. In India, SEBI's rights issue framework through the ASBA mechanism supports renounceable rights — Rights Entitlement (RE) shares are credited to the Demat account and can be traded on the exchange during the rights issue period, providing all shareholders with the choice to subscribe, sell their entitlement, or let it lapse.