Why Mindtree will be excluded from F&O contracts in November

Normally, when there is a restructuring of the company through a scheme of amalgamation or sale of business, there is an impact on the F&O trading, if the stock is already available in F&O. In such cases, the exchange removes such companies from F&O trading and would look at introducing the company back into F&O trading only after the corporate restructuring or scheme of arrangement is completed. Earlier we have seen such stoppage of F&O trading in the case of Tata Chemicals when it sold the salt business to Tata Consumer Products. We also saw cessation of F&O trading in GMR Infra when GMR Power was divested into a separate company. The latest to be removed from F&O is Mindtree Ltd.

Reason for Mindtree removal from F&O – Merger with L&T Infotech

It may be recollected that the Larsen & Toubro group had earlier announced the merger of L&T Infotech (LTI) and Mindtree. The surviving company LTI-Mindtree will continue under the code of LTI, but the shares of Mindtree will cease to exist. The operationalization of the merger deal was effective from 14th November. The new entity, LTI Mindtree, will start trading on the bourses from November 24th. Here is how the scheme of arrangement would work. The shareholders of Mindtree will get 73 LTI shares for every 100 shares they hold post the merger. Post the merger deal, L&T will hold 68.73% in LTI Mindtree, the merged entity. November 24th 2022 will be the record date for merger eligibility determination.

Investors and shareholders whose names appear on the list of Mindtree shareholders as of the close of 24th November 2022, will be eligible to get shares of LTI in the ratio of 73 share for every 100 shares held. Hence, for this merger, 22nd November will be the last cum-merger date will 23rd November will be the ex-date from which the stock will trade ex-merger. One issue that remains is what about fractional shares since unless you hold in multiples of 100 shares, you are likely to be allotted fractional shares. Here is how the fractional shares will be handled by the scheme of amalgamation.

Firstly it must be remembered that for any monies received from fractional entitlements, there would be no TDS obligation for resident Indian shareholders. Since fractional shares cannot be traded in the market, they only way out is to encash them proportionately. However, TDS obligation is there for non-resident Indians (NRIs) and for resident Indians who have not submitted PAN details to the bank. The fractional shares are encased into equivalent value and then handed over to the existing shareholders in the proportion of the number of such fractional shares held by them.

How will the adjustment of Mindtree happen in F&O?

Here are some basic steps for you to understand how the Mindtree stock will be adjusted in F&O to factor in the scheme of arrangement with LTI.

1. All existing contracts in the underlying MINDTREE expiring after November 22, 2022 (last cum date) will be physically settled. This applies to contracts expiring in the month of November-2022 , December-2022 and also January-2023. All such contracts pertaining to Mindtree shall automatically expire on November 22nd, 2022 and shall be physically settled as per the mechanism specified.
    

2. The settlement price to be reckoned for the purpose of final settlement shall be the weighted average price of MINDTREE as determined by NSE Clearing Corporation Ltd under the interoperability framework.
    

3. All positions in the existing futures and options contracts on the underlying MINDTREE shall cease to exist pursuant to the final settlement on November 22, 2022.