There are two ways you can handle your shares and they are - dematerialisation and rematerialisation. Though these words may sound complex, they hold very simple meanings. While dematerialisation is all about converting your physical share certificates into digital form, rematerialisation refers to converting the digital shares into their physical form. When you invest in the stock market, it is important you are aware of both of these processes. Let us now examine dematerialisation and rematerialisation in greater detail, highlighting their differences.
What is the Dematerialization of Shares?
Dematerialization, commonly known as demat, is the process of converting physical share certificates into electronic or digital form. This eliminates the need to store physical certificates, allowing you to manage your shares conveniently through an online demat account.
How Does Dematerialisation Work?
Dematerialization of shares is the process through which physical share certificates are converted into electronic form.Before you dematerialise your shares, you need to first open a Demat account with a Depository Participant (DP) like Tradejini. This account would hold all your digital shares. Now that you have a Demat account, the next step would be to submit your physical shares to the DP, who would then be responsible for the verification and conversion of physical shares into their electronic form. After verification, the DP would add the digital shares to your Demat account, you can then trade or hold them.This is known as the shares dematerialisation procedure, which ensures that your shares are converted into digital format safely
Benefits of Dematerialisation
The benefits of dematerialisation are:
- It is easy and safe as there is no more worrying about losing or damaging your certificates.
- You can trade your shares quickly, as digital shares allow for fast buying and selling.
- There is transparency and accuracy involved and hence, you can see real-time updates on your shares.
What is the Rematerialisation of Shares?
Rematerialisation is the opposite of dematerialisation. Here, you convert digital shares from your Demat account back into physical share certificates. However, this process is not very common today.
How Does Rematerialization Work?
You can do the rematerialization of shares in a few simple steps. First, you need to submit a rematerialisation request to your DP, wherein you need to specify the shares you want to convert back to paper form. This includes both listed and dematerialisation of unlisted shares. Next, your DP will verify the request and work with the company that issued the shares. After approval, the company will issue and send new physical certificates to you.
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Benefits of Rematerialisation
There are very few instances where investors opt for the rematerialisation of their shares. Some investors do it for the following reasons:
- Physical shares are more suitable for individuals who trade infrequently.
- Holding physical shares means you are not relying on digital systems, and this reduces certain risks like hacking.
Key Difference Between Dematerialisation and Rematerialisation
The difference between dematerialisation and rematerialisation lies in the form in which you hold your shares, either electronically or physically. Here are some of the key differences:
| Aspect | Dematerialisation | Rematerialisation |
| Meaning | Converting physical shares into electronic form | Converting digital shares into physical certificates |
| Convenience | Is high, as easy access and online trading | Is low, as requires physical handling |
| Cost | Low cost due to less handling and printing | High cost due to fees involved in handling and printing |
| Risk of Loss | Minimal risk of loss or damage | High risk due to loss or theft |
Role of Depositories in Dematerialisation and Rematerialisation
Depositories are financial institutions that help investors with both dematerialisation and rematerialisation. In India, the main depositories are the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). They are to make sure that shares are transferred safely and accurately.
The major functions of these depositories include:
- Record-Keeping: Depositories maintain detailed records of all electronic and physical shares.
- Verification: They verify shares during both dematerialisation and rematerialisation.
- Fraud Prevention: Depositories check ownership to prevent fraud.
- Facilitating Transactions: They make trading easier by holding shares electronically.
When Should You Choose Dematerialisation or Rematerialisation?
Choosing between dematerialisation and rematerialisation depends on your investment style, needs, and comfort level with technology.
You can choose dematerialisation If:
- You trade frequently.
- You prefer online access for your shares.
- You are cost-sensitive.
On the other hand, you can choose rematerialisation if:
- You hold shares for the long term.
- You prefer tangible assets.
- You are less comfortable with technology or online systems.
Pros and Cons of Dematerialisation and Rematerialisation
Pros of Dematerialisation and Rematerialisation:
| Dematerialisation | Rematerialisation |
| Fast and easy: perfect for quick trading and ease of access. | Physical ownership |
| No paper handling | Useful if you plan to keep shares for a long time. |
| Digital shares reduce risks like theft or loss. | Investors can meet legal requirements that require physical certificates. |
Cons of Dematerialisation and Rematerialisation:
| Dematerialisation | Rematerialisation |
| System failure or technology problems can result in issues for investors. | It can be a lengthy process. |
| Online shares have a risk of hacking and are more exposed to cyber theft. | It can be expensive as there are costs involved in handling. |
| Not ideal for investors who are not acquainted with recent technologies. | Shares could be misplaced or stolen. |
Conclusion
So, both dematerialisation and rematerialisation are helpful depending on how you want to manage your shares. While dematerialisation is great for those who prefer handling everything online, rematerialisation suits those who like holding physical certificates for long-term investments. Hence, make sure you are aware of the difference between dematerialisation and rematerialisation.
If you want to make managing your shares easier, download the CubePlus app by Tradejini. It is a simple and user-friendly app that would help you track and trade shares quickly, all from your phone. Tradejini is one of the best online stock trading platform offering affordable and reliable brokerage services, which makes investing easy and cost-effective for everyone.
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Begin your journey.
Also Read: Ways to Identify Your Demat Account Number
