Bharat Forge Ltd goes ex-bonus in the ratio 1:1 on 28 Sep 2017. How does this affect my equity holdings and F&O positions?


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Bharat Forge Ltd goes ex-bonus in the ratio 1:1 on 28 Sep 2017. How does this affect my equity holdings and F&O positions?


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Bharat Forge Ltd goes ex-bonus in the ratio 1:1 on 28 Sep 2017 i.e. 1 bonus share is issued at Rs.0 for every share held in the Demat account of all eligible shareholders.

Effect on Holdings:
When a bonus is issued, the share price reduces, in this case by a factor of 2. So if you held Bharat Forge shares at an average price of Rs.1200, the price of each share on ex-date would be 1200/2 = Rs.600. The price of each share gets divided by 2. Each share held in Demat will become 1 share at Rs.1200 and 1 bonus share at Rs.0.
Please note that your investment value does not increase here. Your share price reduces by half and you receive a new bonus share for the other half.

P&L of holdings:
Until the bonus shares are credited to your Demat, your Bharat Forge holdings in Kite/Q will show an artificial drop in P&L of approximately 50%. Once the bonus shares are credited to your Demat, your P&L will be restored to its correct value.
You will receive an SMS from CDSL when your bonus shares are credited to your Demat which could take upto 2 weeks.
Here are the steps on How to add bonus share price in Q backoffice.

Effect on F&O positions:
Option strike prices are divided by the factor of 2. A strike price of 1220 becomes 610, 1240 becomes 620 and so on. F&O lot sizes are multiplied by the factor of 2. The old lot size of 600 will be revised to a new lot size of 1200.
The future and option prices are divided by the factor of 2 to maintain the same contract value as of before the bonus issue.
If you’re unable to see the revised market lot size on Kite, please do a hard refresh Ctrl + Shift + R and the new lot size will be updated on Kite.

This is the NSE Circular for F&O Adjustments in Bharat Forge.

To know more about corporate actions and its impact on stock prices, do read this Varsity article.


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