Margin Funding

What is the impact of Corporate action such as Bonus Issue or Stock Split on my MTF position?

Impact of different corporate actions on MTF position

Bonus Issue: In bonus issue, the company distributes additional shares to existing shareholders based on the number of shares already held by them.

Suppose ABC Limited announces a bonus issue in the ratio of 1:1. It means that for every share held by existing shareholders, they will receive one additional share as a bonus.

Stock Split: It involves dividing the existing shares of a company into multiple shares depending upon the Split Ratio. This effectively increases the number of outstanding shares in the market while lowering the price per share.

For example, if an investor holds 100 shares priced at Rs 100 each before a 2-for-1 split, they would own 200 shares priced at Rs 50 each after the split.

Impact on your Position: You will not be allowed to hold your MTF position during a Bonus/Split corporate action. You will receive a notification about the deadline up to which your position can be held. If you exceed the deadline, then your position will be squared off automatically.

In majority of the cases position can be held up to T minus 2 days with T indicating the record date of the issue. If you want the advantage of the bonus/split issue, then you can convert your position to delivery and hold the stocks on to the record in your Demat accout.