NATIONAL STOCK EXCHANGE OF INDIA LIMITED

FUTURES & OPTIONS SEGMENT

CIRCULAR

 

Circular No: NSE/F&O/090/2008                                                      September 6, 2008                               

Download No: NSE/FAOP/11247

 

Dear Members,

 

 

Subject: Adjustment of Futures and Options contracts in the security TATAMOTORS

 

In pursuance of the principles prescribed by SEBI for adjustments to futures and options contracts on announcement of corporate action of rights shares and after due consultation with the other Exchange, the members are informed of the following methodology for adjustment:

 

Corporate action:

 

Tata Motors Limited has informed the Exchange that: "The Company would determine detailed terms of the proposed Rights Issue of Ordinary Shares and 'A' Ordinary Shares aggregating upto Rs.4,200 crores, including the issue price on September 02, 2008."  The Committee of Directors of Tata Motors Limited approved the terms of simultaneous and unlinked issue of:

  1.  Ordinary Shares on a Rights basis in the ratio of 1 (one) Ordinary Share for every 6 (six) shares held.  The Ordinary Shares would be issued at a price of Rs.340/- per share of face value of Rs.10/- each aggregating Rs.2186 crores, and
  2. ‘A’ Ordinary Shares on a Rights basis in the ratio of 1 (one) Ordinary Share for every 6 (six) shares held.  The ‘A’ Ordinary Shares would be issued at a price of Rs.305/- per share of face value of Rs.10/- each aggregating Rs.1961 crores

Tata Motors Limited has further informed the Exchange that the record date for purpose of the rights issue entitlement has been fixed as under:- Record Date: September 16, 2008; Purpose: Determining the eligibility of Shareholders for the Simultaneous and Unlinked Rights Issue of Ordinary shares and 'A' Ordinary Shares aggregating Rs. 4,147 crores.

 

Adjustments for equity share portion of Rights (Part 1) will be carried out as follows:

 

Symbol            : TATAMOTORS

Rights ratio     : 1:6

Record Date    : September 16, 2008

Ex-date           : September 9, 2008

 

Adjustments for Options Contracts:

 

1.      Strike Price: The adjusted strike price shall be arrived at by multiplying the old strike price by the adjustment factor.

2.      Market Lot: The adjusted market lot shall be arrived at by dividing the old market lot by the adjustment factor.

Adjustments for Futures Contracts:

 

  1. Futures base Price: The adjusted Futures base price shall be arrived at by multiplying the old Futures base price by the adjustment factor.
  2. Market Lot: The adjusted market lot shall be arrived at by dividing the old market lot by the adjustment factor.

 

An example for deriving the adjustment factor, revised strike/future base price and lot size is given in Annexure – 1.

 

The methodology for position adjustments shall be separately intimated by NSCCL.

 

Members are requested to load the following files in the NEATFO software before trading on September 9, 2008.

 

1.      Security.gz

2.      Contract.gz

  

These files can be obtained from the directory faoftp/faocommon on the Extranet server.

 

The details of the revised option strike prices, futures prices and lots size based on the actual underlying price shall be informed to members separately on September 8, 2008.

 

For any clarifications, members are advised to contact the following officials:

Mr. Sachin Dhar and Mr. Janardhan Gujaran at 022-26598151 and 022-26598152.

 

For and on behalf of

National Stock Exchange of India Limited

 

 

Suprabhat Lala

Asst. Vice President


Annexure – 1

Underlying close price on the last cum date (P): 427.30#

Issue price of the rights (S)     : 340

 

Adjustment factor:

 

Number of Existing shares        =   6

Rights Entitlement

(Rights to subscribe)                 =   1

Total Entitlement                      =   7

 

Benefit per Right Entitlement

= (P – S)

= (427.30 – 340) = Rs.87.30

 

Benefits per share (E)

= (87.30/7) = 12.47143

 

Hence, Adjustment Factor is

= (P-E)/P

= (427.30-12.47143) / 427.30

 

= 0.970813

 

 

Option contracts before adjustment:

 

Instrument

Symbol

Expiry date

Strike

Type

Market Lot

OPTSTK

TATAMOTORS

25-SEP-2008

350.00

CA

412

OPTSTK

TATAMOTORS

25-SEP-2008

390.00

PA

412

OPTSTK

TATAMOTORS

25-SEP-2008

450.00

CA

412

OPTSTK

TATAMOTORS

25-SEP-2008

500.00

PA

412

 

Options contracts after adjustment:

 

OPTSTK

TATAMOTORS

25-SEP-2008

339.80

CA

424

OPTSTK

TATAMOTORS

25-SEP-2008

378.60

PA

424

OPTSTK

TATAMOTORS

25-SEP-2008

436.85

CA

424

OPTSTK

TATAMOTORS

25-SEP-2008

485.40

PA

424

 

 

 

 

 

Futures contract before adjustment:

 

Instrument

Symbol

Expiry date

Market Lot

Futures Price*

FUTSTK

TATAMOTORS

25-SEP-2008

412

423.85

 

Futures contract after adjustment:

 

Instrument

Symbol

Expiry date

Market Lot

Futures Price*

FUTSTK

TATAMOTORS

25-SEP-2008

424

411.50

 

The revised strike/futures prices and the lot size on account of adjustment would appear in decimal places. The strike/futures prices shall be rounded off to the nearest tick size and the lot size shall be rounded off to the nearest integer. 

 

# The price is only an indicative value for the purpose of example.