Record Date v/s Ex-Date

Record Date and Ex-Date are two terms that should be clear to every investor to understand if he/she is entitled to the benefit of corporate actions undertaken by the company. Let us understand both terms:

Record Date:

• • The Record Date is the cut-off date used by the companies to determine whether a particular shareholder is entitled to a corporate action or not.
  • Companies extend benefits to their shareholders/investors in the form of dividend/stock split/bonus shares etc. For doing this, the record date is set by the Board of Directors of the company.
  • If the name of the shareholder appears in the register of the company on the cut-off date, she/he is entitled to receive the benefit of corporate action.
  • For example: Recently, Power Grid Corporation of India Limited (Power Grid) had announced a dividend for which the record date was set as 23 Dec, 2021. So, on this date (cut-off date), if an investor was holding shares of Power Grid, she/he was eligible for the dividend declared by the company

Let us further understand this using multiple scenarios.

Scenario 1:

• • Say, Mr. P, is a new investor and wants to buy the shares of Power Grid to avail the benefit of the dividend declared by the company. For doing so, he should have bought the shares by 21 Dec, 2021. If the shares are bought on or before 21 Dec, 2021, the shares will get credited to his account by 23 Dec, 2021 (considering the T+2 settlement cycle in India) which is the record date and he will be entitled to dividend.
  • If the shares are bought on say 22 Dec, 2021, he will not be eligible to avail the benefit of dividend as the shares will get credited to his Demat account only on 24 Dec, 2021.

Scenario 2:

Mr. A, an existing shareholder of Power Grid, decides to sell his holding nearing the record date. In this case:

• • If the shares are sold before the Record date, say on 21 Dec, 2021, he will not be entitled to the dividend as he is not the shareholder on the cut-off date/record date in the register of the company.
  • If the shares are sold on the Record date i.e., 23 Dec, 2021, then he will be entitled to the dividend as he is the shareholder in the books of the company on the cut-off date/record date.
  • If the shares are sold after the Record Date, say on 25 Dec, 2021, then he will be entitled to the dividend as he was a shareholder in the books of the company on the cut-off date/record date.

Ex-date:

• • Ex-date is the date that tells you when to buy the shares so that the shares are credited to your Demat account before the record date.
  • Ex-date is decided based on the settlement cycle. This date is dictated by the stock exchange in relation to the record date.
  • For Example Company ABC declared a dividend for its shareholders on 9 Dec, 2021. Suppose, the record date for the dividend is set as 25 Dec, 2021. The ex-date would typically fall one day before the record date. Therefore, the ex-date would be 24 Dec, 2021. If an investor is not holding shares of ABC Company by 24 Dec, 2021, he/she will not be eligible to receive the dividend.
  • This simply means that to be eligible to receive the benefit of corporate action, the investor should purchase the shares of a particular company by 23 Dec, 2021, considering the T+2 day settlement cycle.
  • If the share purchase is done on or after the Ex-date, then she/he is not entitled to the benefit of the corporate action.

Note: The T+2 day’s settlement cycle should be calculated excluding non-business days (weekends/holidays). If the ex-date falls on the day which is a holiday/non-working day, then T+2 days should be calculated accordingly.