What is the Exit Route Scheme of BSE?
The Exit Route Scheme has been devised by BSE and approved by SEBI. This Scheme provides an exit to the small investors holding physical shares of companies where deliveries have to be given compulsorily in demat form only. It was observed that small investors having holdings of few shares and of little value were not finding it economical to open a DP account and undergo the process of getting their physical holdings dematerialised. This Scheme allows them to sell their shares in physical form.
Who is eligible to sell shares under this Scheme?
All small investors holding up to 500 shares of a company in physical form in respect of such companies where deliveries are to be given in demat form only are eligible to avail of this Scheme.
How are the orders in physical form placed under this Scheme?
On BOLT system, the "C" groups window, which is used for trading in odd lot scrips, is used for placing buy and sell orders under this Scheme.
How many shares can I sell under this Scheme?
An investor can sell a maximum of 500 shares. The BOLT system allows for entry of single order size of up to 500 shares.
Whether my shares are eligible for delivery under this Scheme?
Before placing a sell order under this Scheme('C' Group window), please ensure that:
- Shares are registered in your name. No street shares are allowed to be delivered against sale in this scheme.
- Shares are registered in your name prior to the date the scrip was mandated for compulsory demat deliveries. Exceptions to bonus shares and rights shares allotted by the companies subsequently has been provided.
- Your Transfer Deed should not bear any other stamp other than that of your broker.
How does the settlement of transactions in this Scheme takes place?
Transactions done under the Exit Route Scheme are settled on weekly basis along with other C group transactions.
If the price of the shares I sold under this Scheme goes down,should I purchase back and make some trading profit?
You cannot square up the transactions done under the Exit Route Scheme as these trades are not netted either against trades in normal groups or against trades in "C" group itself. As such, the settlement of trades done under this Scheme takes place on trade-to-trade basis.
However, you can purchase the shares in normal or exit route window, but both sell and subsequent buy transactions will be treated separate transactions and settled accordingly.
What happens if shares sold by me are returned back by the Company as bad delivery or under objection?
As per SEBI directive, in case of scrips which have been mandated for demat deliveries, you are allowed to rectify the bad deliveries or give replacement within 90 days (from the date of SEBI demat mandate) in physical form. The same rule applies on shares sold through the Exit Route Scheme also. As such, if the shares are returned after 90 days from the date of compulsory demat, you need to give demat share even though you wished to dispose shares in physical form. Please be sure of your signature etc. while filling up the Transfer Deed. This is an area you need to be extra cautious of.
Why should I bear a discount from the current market price while selling shares under this Scheme?
The reasons of a discount in the prices quoted for shares in this Scheme from the normal market prices of the scrips are:
- The buyers of these shares cannot immediately sell the shares either in "C" group or in the normal market.
- The buyers, therefore, have to compulsorily get the shares registered in their names and demateralise the same. As such, the buyers would be incurring the additional cost of transfer and dematerialization on the shares bought from this Scheme.
- Since the transfer and dematerialization is a time consuming process, the buyers cannot take advantage of immediate price changes. Moreover, the buyers have to maintain their investment in the shares till the process of transfer and dematerialisation is over. The interest cost of the investment for the duration involved has to be built in the pricing. As such the investment can be recovered only after the shares are dematerialised and sold in the market.
In view of the above, it would be advisable for an investor to open a demat account instead of selling through this window particularly when his holding is of a high value.
Can I sell more than 500 shares under this Scheme?
Yes! For this, multiple orders would need to be placed, each for up to 500 shares.Investors should not sell large holdings through this Scheme as in such cases opening a depository account could be more economical. Investors are advised to work out economics of selling such shares by comparing cost of dematerializing the shares. and on-going prices of scrips in " C" group.
What happens if I do not deliver the shares sold ?
The transaction will be closed out as per the Rules of BSE and the seller would have to incur loss being the difference in sale price and close out price.