Implications of Rights issue in UPL Limited

UPL Limited has announced the Rights issue effective from 26^th November,2024 with the ratio of 1:8 and adjustment factor of 0.959510.

Impact on your existing Futures and Options position:

IN FUTURES

Positions before adjustment:

Positions after adjustment:

Key consideration – There will be no change in your overall exposure or margin requirement. The price decreases and the lot size increases, keeping the contract value constant.

IN OPTIONS

How the lot size, strikes and premium works - example as follows:

Adjustment factor = 0.959510

The final adjustment prices will be issued by the exchange one day before the effective date.

Key consideration- The adjustments ensure that while individual elements (strike price, lot size, and premium) change, the total position value remains unchanged.

What is the margin required for revised UPL LTD contracts?

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

How do F&O expiries get adjusted after rights issue?

 - The expiry dates of F&O contracts remain the same; only the price and lot size adjustments take place. No changes are made to the expiry or contract duration.

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

- Yes, you can carry over your existing F&O positions post-right issue. The exchange automatically adjusts the strike price, lot size, and contract terms, so you don’t need to take any specific action. However, it’s essential to monitor any notifications from your broker or the exchange for smooth handling of the adjustment.

How my physical settlement works under right issue?

-If one has gone long in stock option and as on effective date i.e., 26^th November, 2024, the customer’s needs to bring 45% of Var + ELM as per the rules, the margin requirement will be as per the contract value that is unchanged.

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

- It is shown in order book in offline mode as provided in the example below:

Will it impact my profit / losses?

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

What will be the impact on portfolio?

-The portfolio will show the following transactions.

Adjustments in portfolio are shown as below taking an example of TATASTEEL as previously corporate action was held:

Here the TATASTEEL 25-JUL-2024-166.4-PE and 170-PE is shown:

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

In summary, the right issue only adjusts the numerical values of strike prices, lot sizes, and premiums and futures prices while keeping the overall value of F&O positions unchanged.

It is advisable to monitor F&O positions in UPL LTD and take timely action.