InvestorQ : Can you tell me NMDC demerger of steel business will get adjusted for F&O contracts if I was holding the stock in F&O?
Juvina Maggie made post

Can you tell me NMDC demerger of steel business will get adjusted for F&O contracts if I was holding the stock in F&O?

Deepa Salunkhe answered.
4 weeks ago

Let me clarify that in a demerger, there is no F&O adjustment. In the case of NMDC, the stock has gone ex-demerger on 27th October since 28th October was the record date for the demerger. The record date is the date for entitlement of the demerged company shares. NMDC is hiving off its iron and steel business into a separate company and shareholders will be issued and allotted shares of the new company into their demat account based on their demat entitlement. Only shareholders who bought the shares latest by 25th of October, would have been entitled to receive the demerged company shares.

The scheme of demerger will not lead to any adjustment in the F&O segment, but the price will automatically get adjusted for the loss of steel business from the main NMDC.

· The scheme of demerger entailed demerger of the iron and steel business of NMDC while the company would only retain the core mining business in NMDC Ltd.

· The record date has been fixed as October 28th, 2022 for the purpose of issuance and allotment of the shares of the demerged entity, so the ex-date was 27th October and the last cum-date to buy shares of NMDC for demerger shares was 25th October.

· Eligible shareholders whose names appear in the roster of shareholders as of end of 28th October, will be allotted 1 equity share of Rs.10/ face value each of NMDC Iron & Steel Ltd for every 1 equity share of NMDC Limited.

· Since this is an asymmetric corporate action, there will be no adjustment to the lot size or to the strike price of options done in this case. The adjustment will automatically happen in the price of the stock, which is now down to adjust for the demerger.

· All existing open F&O contracts of NMDC Ltd; expiring on or after October 25th 2022 would be impacted. So, the contracts for the months of October 2022, November 2022 and December 2022 have automatically expired on October 25th, 2022 and the same were physically settled as per the regular mechanism adopted in such cases.

· The settlement price for such settlement as above was the weighted average price of NMDC as determined by the clearing corporation under the interoperability framework. There will be no pending F&O contracts of any maturity as of the close of 25-October.

· The respective pay-in and pay-out of final MTM of all F&O contracts on NMDC shall be October 27th, 2022, while the physical settlement will be effected on October 28th, 2022. The new price will reflect the fact that NMDC will hive off assets worth Rs18,650 crore and liabilities worth Rs1,602 crore into the demerged entity. Lot size of NMDC will continue to remain at 3,350 shares.