Short delivery occurs when a seller fails to deliver the shares to the buyer by the agreed settlement date, typically T+2 in India. This situation can arise due to various reasons, such as logistical issues or discrepancies in the seller's holdings. Short delivery can have several significant impacts on buyers:
There may be a delay in receiving your shares due to short delivery. The exchange typically conducts an auction to procure the undelivered shares on T+2, and if successful, the shares are delivered to the buyer on T+3 day.
If shares cannot be procured in the auction, the transaction may be settled in cash. This cash settlement is usually calculated at a premium (20%) over the closing price of the shares on the auction day. This delay can affect your ability to sell the shares or benefit from any corporate actions promptly.
2. Missing Corporate Actions:
If dividends are declared or other corporate actions (such as bonus issues or stock splits) occur during the period of delayed delivery, you might not benefit from them. For example, if the shares are not delivered by the record date for a dividend, you would miss out on that dividend payment. Similarly, any other corporate benefits declared during this period would not accrue to you, potentially affecting your expected returns from the investment.