Adjustments in F&O contracts of Motherson Sumi on account of demerger

The board of Motherson Sumi Systems Ltd. has announced a demerger of its wiring business into a separate entity. As per the scheme of demerger, Motherson Sumi will be issuing 1 equity share of Motherson Sumi Wiring India for every one share held in Motherson Sumi Systems Ltd.

The company has fixed January 17, 2022 as the record date to determine the shareholders who will be eligible for the corporate action. You can check the announcement here.

As Motherson Sumi trades in the F&O segment, the following adjustments will be carried out on the Futures and Options contracts of MOTHERSUMI:

All existing F&O contracts of MOTHERSUMI with expiry dates January 27, 2022, February 24, 2022, and March 31, 2022, will expire on January 13, 2022 and will be and be physically settled just like it happens on the day of monthly expiry. You can learn more about physical settlement here.

The settlement price for the purpose of the final settlement will be the weighted average price of MOTHERSUMI.

All positions in the existing F&O contracts on the underlying MOTHERSUMI will cease to exist pursuant to the final settlement on January 13, 2022. Futures and Options contracts on MOTHERSUMI will be introduced again with expiry January 27, 2022, February 24, 2022, and March 31, 2022, from January 14, 2022 onwards.

You can check the announcement from the exchange here.


What happens to OTM Options by 13th Jan EOD? Will the premium on OTM options move to zero by that time due to shortened expiry?

Yes OTM options will expire wortthless.

Isn’t it unfair? People paid option premiums for 1-3 months, and their options will expire in 2 days?