Hindpetro going ex-bonus with 1:2 ratio. Please explain with examples how it affects both my holdings and F&O positions average prices.
Hello,
Hindpetro goes ex-bonus in the ratio 1:2 on 11 July 2017, i.e. 1 bonus share issued at Rs.0 for every two shares held in the Demat account of all eligible shareholders.
Effect on Holdings:
When a bonus is issued, the share price drops, in this case by a factor of (1+2)/2 = 1.5. So if you held Hindpetro shares at an average price of Rs.450, the price of each share after bonus would adjust to 450/1.5 = Rs.300. You’ll have 1 share at Rs.0 for every two shares at Rs.300, thereby maintaining your overall investment value.
Please note that a bonus issue only increases liquidity and not your investment value.
P&L drop:
Until the bonus shares are credited to your Demat, your Holdings will show a drop in P&L of approximately 33%. Once the bonus shares are credited at an avg price of Rs.0, your P&L in Kite/Q 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.
Steps on how to update bonus share price in Q backoffice.
Effect on F&O positions:
Option strike prices are divided by the factor of 1.5. A strike price of 560 becomes 373.35, 580 becomes 386.65 and so on. F&O lot sizes are multiplied by the factor of 1.5. The old lot size of 1050 will be revised to a new market lot of 1575.
The future and option prices are divided by the factor of 1.5 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.
Issued NSE Circular for F&O Adjustments in Hindpetro.
To know more about corporate actions and its impact on stock prices, do read this Varsity article
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