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NISM Series VI Depository Operations – Part 6: Corporate Actions, Public Issues, Tender Offers, Debt Instruments & Government Securities

12 Apr 2026 • NISM-Series-6: Depository Operations Mock Tests

NISM Series VI Depository Operations – Part 6: Corporate Actions, Public Issues, Tender Offers, Debt Instruments & Government Securities

Quick Summary: Part 6 of our NISM Series VI short notes covers corporate actions in the depository system (dividends, bonus, rights, mergers), the IPO demat process, tender offers, and the handling of debt instruments, Certificates of Deposit (CDs), Commercial Papers (CPs), and Government Securities (G-Secs) through the depository.

What are Corporate Actions?

Corporate actions are events that affect the rights, obligations, and/or interests of beneficial owners holding securities in a depository. Common examples include:

  • Payment of dividend and interest
  • Bonus share issue
  • Rights issue
  • Stock split (sub-division)
  • Merger and amalgamation
  • Redemption of securities
  • Payment of call money
  • Liquidation

Two Types of Corporate Actions:

  • Cash corporate actions – Involve distribution of monetary benefits, such as dividend and interest payments.
  • Non-cash corporate actions – Involve distribution of non-monetary benefits, such as bonus share issues, rights issues, or conversion of securities.

What is a Record Date?

Corporate actions affect only those investors who hold the securities as on a specific date. The issuer announces a Record Date (cut-off date) to determine the eligible Beneficial Owners (BOs) who are entitled to receive corporate benefits.

In certain cases, the issuer sets a Book Closure Start Date and a Book Closure End Date. In such cases, the depository system generates a holding report (list of BOs with holdings) as at the end of the day one day prior to the book closure start date.

Procedure for Corporate Actions

  1. On the announced cut-off date (record date), the depository provides the details of BO holdings to the Issuer or its RT&A.
  2. This information includes the tax status and bank account details of each BO.
  3. Securities balances in Clearing Member / Clearing Corporation / Intermediary accounts are also eligible to receive corporate benefits.

Monetary Benefits (Cash Corporate Actions)

The Issuer / RT&A distributes dividends, interest, and other monetary benefits directly to the eligible BOs based on the holding details provided by the depository as of the record date.

Non-Monetary Benefits (Non-Cash Corporate Actions)

  • The Issuer / RT&A informs eligible BOs about the non-monetary corporate action.
  • If the benefit is in the form of securities, the Issuer / RT&A gives investors (both physical and demat holders) the option to receive the new securities either in electronic or physical form.

Rights Issue

For a rights issue, the Issuer dispatches the application form to all eligible BOs based on holding details from the depository. The form asks the investor to state whether they want the new securities in physical form or dematerialised form.

Mergers, Amalgamation, Capital Reduction, Sub-Division

For these corporate events:

  • Shares held in demat accounts under the old ISIN are automatically debited.
  • The proportionate number of new shares is credited under the new ISIN.

Corporate Benefits on Pledged / Hypothecated Securities

Ownership of pledged or hypothecated securities remains with the pledgor (borrower) until the pledge is invoked. Therefore, all corporate benefits — dividends, bonus shares, rights — continue to accrue to the borrower.

Debt Securities – Interest Payment

Eligible investors in debt securities receive interest directly from the Issuer / RT&A. However, for government securities, the depository distributes the interest to eligible clients after the Reserve Bank of India (RBI) credits the interest amount to the depository's account.

Public Issues and the Depository

The primary market is where issuers raise fresh capital from investors through public issues such as Initial Public Offers (IPOs), Follow-On Public Offers (FPOs), or private placements.

Mandatory Demat for Public Issues

  • Allotment of equity in public issues is mandatory in demat form.
  • Investors must open a demat account before applying for a public issue.
  • The SEBI guidelines require that all public issues of Rs. 10 crore and above be compulsorily made in demat form.

Application Form Requirements

Public issue application forms must have provision for investors to furnish:

  • Depository Name
  • DP's Name
  • DP-ID
  • Beneficiary Account Number (BO ID)

IPO Process Flow Through the Depository

  1. The Beneficial Owner (investor) submits an application for allotment to the Issuer / RTA.
  2. The Issuer / RTA sends the BO ID to the depository for verification.
  3. The depository sends back a verification report to the Issuer / RTA.
  4. The Issuer / RTA sends the details of allotments to the depository.
  5. The depository credits the allotted securities to the respective BO accounts.
  6. The Issuer / RTA sends intimation of allotment to the Beneficial Owners.

Tender Offers

Tender offers include corporate events such as buyback, takeover offers, and delisting offers. Eligible shareholders (clients) who wish to participate must submit delivery instruction slips (DIS) or electronic instructions to their DPs.

Process:

  • Upon submission of the delivery instruction in the eDPM system, if sufficient balance is available, the required quantity of securities is blocked in the BO's demat account in favour of the respective Clearing Corporation based on the market type and settlement number of the tender offer.
  • For inter-depository instructions where the target account in NSDL is a Clearing Member Pool Account, shares are automatically transferred to the Clearing Corporation.

Debt Instruments in the Depository

A debt instrument (or debt security) is a written agreement to repay a loan, usually with interest, within a specified time frame. Debt instruments include bonds, debentures, Commercial Papers (CPs), Treasury Bills (T-Bills), and Certificates of Deposit (CDs).

Identification – ISIN for Debt Instruments

Each debt security is assigned a unique ISIN linked to its specific features. The instrument descriptor in the depository system includes:

  • Name of the Issuer
  • Coupon / Interest Rate
  • Security Name
  • Redemption Date
  • Face Value

Adding a Debt Instrument to the Depository System

  1. The Issuer sends a request to the depository with details of the instrument and a Letter of Intent.
  2. A tripartite agreement is signed between the depository, the Issuer, and the Registrar & Transfer Agent.
  3. Once admitted, these securities are made available for dematerialisation.

Corporate Action for Debt Instruments

Interest payment for debt instruments is handled the same way as corporate benefits for equity. The Issuer sends interest warrants directly to the investor.

Call / Put Option on Debt Instruments

Exercising a call or put option only pre-pones the redemption date of the instrument. The procedure is the same as normal redemption. The Issuer sends redemption proceeds directly to the investor.

Dematerialisation Procedure for Debt Instruments

The procedure for dematerialising debt instruments is the same as for equity shares. There is no restriction on using existing demat accounts for debt instruments.

Certificate of Deposit (CD)

  • An investor can hold CDs in a separate demat account or combine them with other securities in one account.
  • The minimum subscription / transaction size through the depository is Rs. 1 lakh.
  • The client submits the CD certificates along with a DRF to the DP for dematerialisation.
  • Before submission, the holder must write the endorsement on the reverse of the CD and sign it.

Redemption of CDs

  • The Issuer must open a Redemption Account with a DP.
  • Investors holding CDs in demat form must instruct their DP (via DIS) to transfer the CDs to the Issuer's Redemption Account so that the transfer is completed by 3:00 PM at least two working days before the maturity date.

Commercial Paper (CP)

  • Minimum subscription: Rs. 5,00,000 or multiples thereof (face value of CP = Rs. 5,00,000 in the depository system).
  • The client submits the CP along with a DRF to the DP for dematerialisation.
  • Only CPs made available for dematerialisation by their issuer can be dematerialised.
  • Buying and selling procedures for demat debt instruments are the same as for equity shares.

Government Securities (G-Secs)

A government security is a security created and issued by the Central Government or a State Government to raise public loans.

Two Types of Government Securities:

  • Dated Securities – Maturity period of more than one year
  • Treasury Bills (T-Bills) – Maturity period of up to one year

All activities related to G-Secs — issue management, trade settlement, interest distribution, and redemption — are handled by the Reserve Bank of India (RBI) through its Public Debt Office (PDO).

Depository's Role in G-Secs:

  • Depositories maintain SGL (Subsidiary General Ledger) accounts for investors through DPs.
  • Any existing client account with a DP can be used for G-Sec transactions — equity, MF units, and G-Secs can all be held in a single demat account.
  • The depository acts as the RT&A and discharges RTA functions for G-Secs.
  • G-Secs can be held in physical form or as electronic entries in an SGL account.
  • Transfer procedure for G-Secs within the depository is exactly similar to equity shares.
  • The depository's G-Sec cell can reject demat requests if RBI rejects the transfer due to signature mismatch or unregistered signatories.
  • In such cases, the DP notifies the client by letter or fax along with the rejection memo.
  • DP must ensure that BO account details (bank details, address, etc.) are updated well before the interest payment or redemption due date.
  • The depository distributes G-Sec interest to eligible clients before End of Day (EOD) of the interest payment date, after RBI credits the interest amount to the depository.

Quick Revision Points for NISM Series VI Exam

  • Record Date = cut-off date to determine eligible BOs for corporate benefits
  • Corporate benefits on pledged securities go to the pledgor (borrower), not the pledgee
  • For merger/amalgamation: old ISIN debited, new ISIN credited automatically
  • Public issues ≥ Rs. 10 crore must be compulsorily in demat form
  • Equity allotment in public issues is mandatory in demat form
  • Tender offers include buyback, takeover, and delisting offers
  • CD redemption DIS must be submitted by 3:00 PM at least 2 working days before maturity
  • CP minimum face value in depository = Rs. 5,00,000
  • CD minimum transaction size through depository = Rs. 1 lakh
  • G-Secs: RBI (through PDO) handles issue management; depository distributes interest
  • Dated Securities: maturity > 1 year; T-Bills: maturity ≤ 1 year
  • For G-Secs, depository acts as the RT&A

Up Next: Part 7 – FPI, BSDA, SCORES & IEPF: Complete Final Notes

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