The Board of Directors of TCS at its meeting held on January 09, 2023, declared an interim dividend of Rs. 8/- and a special dividend of Rs. 67/- per share, the ex-dividend date being, January 16, 2023.
SEBI has prescribed a framework to the exchanges for adjustment of corporate actions in derivative contracts at the time of the corporate action. The exchange has published everything regarding the adjustments in case of corporate actions here. Accordingly, if a company declares a dividend at and above 2% of the market value of the underlying security, it is considered as extra-ordinary dividend and the exchange will take actions in the adjustment of the futures and options contracts in the underlying security.
Since the dividend declared by TCS is above 2% of the market value of the security, the exchange has published this circular on the adjustment of F&O contracts in TCS on the ex-date: January 16, 2023.
Adjustment for future contracts:
All positions in futures contracts of TCS will be marked-to-market on the last cum-dividend date i.e. January 13, 2023, based on the daily settlement price of the respective futures contract. Subsequently, open positions will be carried forward at the daily settlement price less Rs. 75 (dividend amount) for the respective futures contract.
From January 16, 2023 (ex-dividend date), daily mark-to-market settlement of the futures contracts would continue as per normal procedures.
For example:
Assume you bought 1 lot (175 quantity) of TCS futures on January 13, 2023, at Rs. 3200 and the daily settlement price at the market close is Rs. 3300, you would have made a mark-to-market profit of Rs. 100 per share.
On January 16, 2023, the previous day’s position will be carried forward at Rs. 3225 (i.e. 3300 - 75). If the closing price on January 16th is Rs. 3250, you’ll make a mark-to-market profit of Rs. 25 per share.
Adjustment for options contracts:
The full value of the dividend i.e. Rs. 75 will be deducted from all the cum-dividend strike prices on the ex-dividend date. All positions in existing strike prices will continue to exist in the corresponding new adjusted strike prices.
For example:
The strike price of Rs. 3300 Call Option will be reduced to Rs. 3225 on January 16, 2023, and the positions in Rs. 3300 Call Option will continue to exist in Rs. 3225 Call Option.
The lot size of the F&O contracts will not change.
Also, if you hold equity shares of TCS in your Demat account as of January 17, 2022 (record date) you will be entitled to receive the dividend which will be credited directly to your primary bank account within 30 to 45 days from the record date.