ADJUSTMENTS OF BONUS ISSUE IN INDRAPRASTHA GAS LIMITED

INDRAPRASTHA GAS Limited has announced a bonus share in the ratio 1:1. The Company has fixed Friday, January 31, 2025 as the Record Date.

What is adjustment factor in INDRAPRASTHA GAS Limited?

Adjustment factor for Bonus share of A: B is defined as (A+B)/B.

In the case of INDRAPRASTHA GAS LIMITED, the adjustment factor is (1+1)/1 = 2

What will be the new Strike price & lot size for Options?

Strike Price: The adjusted strike price will be arrived at by dividing the old strike price by the adjustment factor i.e., 2.

Lot Size: The adjusted lot size will be arrived at by multiplying the old market lot by the adjustment factor.

Old lot size=1375

Adjustment factor = 3

New lot size = 1375*2= 2750

What is the new price for future contracts?

You can calculate the same as follow

= (Closing price / Adjustment factor) *New lot size

= (Closing price / 2) * 2750

What will happen to F&O open positions in INDRAPRASTHA GAS Limited?

For clients holding F&O contracts expiring on 27^th February, 2025, 27^th March, 2025: These contracts shall expire on respective expiries & will be adjusted according to the framework prescribed by SEBI. The adjustment for Futures will be Price and Lot Size & for Options will be Strike Price and Lot Size and option premium.

How price is calculated?

Let’s walk through an example to demonstrate the impact of the 1:1 bonus share issue on both Futures and Options positions in INDRAPRASTHA GAS Limited.

Scenario: Pre-bonus

INDRAPRASTHA GAS Limited Stock price: ₹390

Lot Size for Futures & Options: 1375 shares per lot

Option Strike Price (Call Option): 380

Option Premium: ₹12 per share

Position:

1 lot of INDRAPRASTHA GAS Futures (Long) at ₹390

1 lot of INDRAPRASTHA GAS Call Option (Long) with 380 strike price and premium of ₹12

Post-bonus: Impact on Position

Impact on Futures Position:

Price Adjustment: Post the 1:1 bonus issue, the price of the futures contract will be adjusted downward. If the pre-bonus price was ₹390, the post-bonus price will be approximately 2 times lower to ₹195 (subject to market behaviour).

Lot Size Adjustment: The lot size will double from 1375 shares to 2750 shares.

Value of Position:

Pre-bonus Value of Futures: ₹390 × 1375 = ₹5,36,250

Post-bonus Value of Futures: ₹195× 2750 = ₹5,36,250

The notional value of the futures contract remains the same at ₹5,36,250, so the value of your position is not affected in terms of total worth.

2. Impact on Options Position:

Adjustments	Formula	Example
Strike Price	New Strike Price = Old Strike Price/ 2	Old strike price = 380 New strike price = 190
Lot Size	New lot size = Old lot size * 2	Old lot size = 1375 New lot size = 2750
Option Premium	New premium= Old premium/2	Old premium = 12 New premium = 6

Value of Position:

Pre-bonus Value of Options: ₹12 (premium) × 1375 (shares) = ₹16,500

Post-bonus Value of Options: ₹6 (premium) × 2750 (shares) = ₹16,500

Like the futures, the notional value of your options position remains the same at ₹16,500.

Summary of Impact:

1. Futures:

The price will be half (from ₹390 to ₹195), but the lot size will double (from 1375 to 2750).

The overall value of your futures position remains the same.

2. Options:

The strike price and premium will be changed (strike price from ₹380 to ₹190, premium

from ₹12 to ₹6), and the lot size will double (from 1375 to 2750).

The total value of your options position also remains unchanged.

What is the impact on my mark to market settlement?

Since the futures price will be adjusted, clients' MTM values will also reflect this change. However, the overall position in value terms should remain neutral because both the price and the lot size change in proportion.

Will the open interest change after the bonus share, and how is it adjusted?

The open interest in terms of the number of contracts or lots held remains the same, but the actual number of shares in each contract changes. So, while the contract count doesn't change, the shares per contract do, ensuring the overall position value is unaffected.

Is there any change in margin requirements due to the bonus share?

Typically, the margin requirements are adjusted to reflect the new lot size and contract price. Since the value of the position remains the same, there is no significant change in the total margin required.

What is the margin required for revised INDRAPRASTHA GAS LIMITED contracts?

Margin will be as per the exchange rule of SPAN + ELM

Can I carry over my existing F&O positions after bonus shares, or do I need to take any action?

Yes, you can carry over your existing F&O positions after bonus shares. The exchange automatically adjusts the strike price, lot size, and contract terms, so you don’t need to take any specific action.

When will the adjustment be reflected?

The adjustments in F&O positions will be made by the exchange at the time of the ex-bonus date.

What happens if I exit my position before the ex-bonus date?

-If you exit F&O position before the ex-bonus date, they will not be affected by the bonus adjustment. The exit will occur at the market prices prior to the adjustment.

How one can check corporate action while having an open position?

- It is shown in order book in offline mode. The changes will reflect before the execution date, on your F&O open position as shown in example below:

Will it impact my profit / losses?

-No, it does not affect your profit and losses as the contract value remains unchanged.

Only strike prices, lot size and premium will be adjusted accordingly.

What will be the impact on portfolio?

The portfolio will show the following transactions.

Adjustments in portfolio are shown in the example below:

For Example - 550-PE, 540-PE, 520-PE strikes is valued at 110-PE, 108-PE, 104-PE respectively as shown above in portfolio details.

Transactions will show the price adjustment at ₹0.05 with adjusted strike price with adjusted lot size as shown below:

Overall Trading impact on 27^th November,2024

Adjustments	Formula	Example
Strike Price	New Strike Price = Old Strike Price/ 2	Old strike price = 380 New strike price = 190
Lot Size	New lot size = Old lot size * 2	Old lot size = 1375 New lot size = 2750
Option Premium	New premium= Old premium/2	Old premium = 12 New premium = 6

Your total position value is unaffected by the bonus; it's just the numerical parameters (strike price, lot size, and premium) that are adjusted accordingly. One can exit its position partially as the number of lot size is increased.

In summary, the bonus shares only adjust the numerical values of strike prices, lot sizes, and premiums while keeping the overall value of F&O positions unchanged.

Points to Remember:

-Review Portfolio: Clients should be advised to review their portfolio post-adjustment to ensure everything is in order.

-Monitor Volatility: Bonus issues can lead to some short-term volatility in stock prices, which may affect options premiums and futures prices.

-The bonus issue is a neutral event in terms of your position value.

-Take actions accordingly if you want to modify or exit your position or you can partially square off too.

It is advisable to monitor F&O positions in INDRAPRASTHA GAS LIMITED and take timely action.

NSE circular: Circular

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