Adjustments Made to Nestle India's Financial and Operational Sector
Nestle India Announces 1:1 Bonus Issue: Key Adjustments to Derivatives Contracts
Nestle India has announced a 1:1 bonus issue, which means shareholders will receive one additional share for every share held. This corporate action will result in a doubling of the total shares and a halving of the stock price theoretically. To ensure fairness to market participants and maintain the economic value intact, adjustments will be made to Futures and Options (F&O) contracts.
The adjustment factor for this bonus issue is calculated as (1 + 1) / 1 = 2. This factor will be used to adjust the strike price, price, lot size, and daily settlement prices of the derivative contracts.
Strike Price and Price Adjustments
The strike price of options contracts will be divided by the adjustment factor, resulting in a reduced strike price of ₹X/2. Similarly, the futures contract price will also be adjusted, with a revised price of ₹X/2.
Lot Size Adjustments
The lot size for both futures and options contracts will be multiplied by the adjustment factor. This means the lot size will double for both types of contracts.
Daily Settlement Price Adjustments
Daily settlement prices for the derivatives will be adjusted on the ex-date (August 8, 2025) to reflect the corporate action using the adjustment factor.
These adjustments are in accordance with SEBI-prescribed frameworks to ensure fairness to market participants across cum and ex-bonus dates.
If the nearest expiry futures closes at ₹2,300 on August 7, it will be revised to ₹1,150 (₹2,300 divided by 2) on the record date. The modifications in options contracts will take effect from August 8.
Traders are required to note the changes in the contracts they hold due to these modifications. The adjustment in futures contracts will be based on the daily settlement price (mark-to-market) of futures contracts on August 7, the day before the record date.
The overall trend of Nestle India's stock is not expected to be significantly impacted by these modifications. The changes in options contracts are part of the adjustments following Nestle India's bonus issue.
On August 8, the stock price and all derivatives contracts on Nestle India will be adjusted appropriately. The ex-date for the Nestle India bonus issue is August 8, 2025, and the derivative contracts will be adjusted accordingly on or before this date.
In options contracts for Nestle India, all existing strike prices will be divided by 2 from August 8. The revised contract value will remain unchanged after the adjustment in the lot size. Open positions in futures contracts shall be carried forward to August 8 at the daily settlement price on August 7 divided by 2, the adjustment factor.
The adjustment factor for options contracts is implied to be 2, consistent with the bonus issue ratio. The adjustments aim to maintain the contract value consistency after the bonus issue.
The company has set August 8 as the record/effective date for the adjustments. The changes in options contracts do not necessitate a change in traders' views on the stock's direction. Traders are advised to carefully consider these adjustments when planning their trading strategies.
[1] Reference: SEBI guidelines for corporate actions and their impact on derivatives contracts.
- With the adjustments to Nestle India's Futures and Options (F&O) contracts following the 1:1 bonus issue, the strike price of options contracts will be reduced to ₹X/2, while the futures contract price will also be adjusted to ₹X/2.
- For both futures and options contracts, the lot size will be doubled by multiplying the current lot size by the adjustment factor (2).
- The daily settlement prices for the derivatives will be adjusted on the ex-date (August 8, 2025) to reflect the corporate action using the adjustment factor, ensuring fairness across cum and ex-bonus dates.
