ISIN

Once shares are dematerialised they have no certificate number and no distinctive numbers. Something still has to say which security a balance of 600 units is a balance of.

That is the International Securities Identification Number. Every security admitted to a depository carries one, allotted under ISO 6166 and unique across the ISO member countries, so the same code works for a domestic trade and a cross-border one.

In India, SEBI has delegated the allotment of ISINs to NSDL. A security being admitted to CDSL still gets its ISIN from NSDL, on CDSL's request. Government securities are the exception: the Reserve Bank of India allots those.

An ISIN is 12 characters in three parts:

1. a prefix — the two-letter ISO 3166 country code, IN for India;
2. a basic number — nine alphanumeric characters;
3. a check digit, computed on the modulus 10 "Double-Add-Double" rule, which establishes that the code is valid.

Take INE475C01012:

The third character is the one to watch: E a company, F a mutual fund unit, A a Central Government security, B a State Government security, and 9 equity shares carrying rights different from the equity that bears the INE number.

Securities issued by the same company at different times, or carrying different rights, terms and conditions, are different securities for this purpose and get distinct ISINs.

A company has three lines outstanding. All three belong to one issuer; all three have separate ISINs:

An investor holds 400 fully paid shares at Rs 940 (Rs 3,76,000) and 400 partly paid rights shares at Rs 310 (Rs 1,24,000). They sit in the same demat account, in the same name, and they are not interchangeable — two ISINs, two balances, two separate delivery instructions.

When the same investor sends 400 physical share certificates for dematerialisation, the DP must fill a separate DRF for each ISIN. Get it wrong and the R&T Agent rejects the request under the objection "demat request initiated under wrong ISIN": the documents come back to the DP, a fresh demat request has to be generated under the correct ISIN, and the whole cycle — seven days out to the registrar, fifteen days for it to confirm or reject — starts again from zero.

Chapter 7 (Functions of DP — Dematerialisation) opens with ISIN, and Chapter 3 records that allotting ISINs is an obligation of the depository under the tripartite agreement. Expect the character count (12), the three components, who allots them (NSDL by SEBI delegation; RBI for G-secs), and above all the meaning of the third character — the workbook says in as many words that it is important to pay special attention to it.

• 12 characters, not 10 or 11. Nine of them are the basic number, one is the check digit, two are the country code.
• NSDL allots ISINs for CDSL securities too. CDSL requests, NSDL allots. Only government securities go to the RBI.
• A is Central Government, B is State Government. Swapping these is the standard wrong option.
• One company, many ISINs. Different issues and different rights mean different codes — partly paid shares are not the same security as fully paid ones.
• The check digit validates, it does not identify. It tells you the code has not been mistyped; it tells you nothing about the issuer.
• A security can be dematerialised only after its ISIN is activated by the depository. An allotted but inactive ISIN is not enough.