BENGALURU, April 27 (Reuters) - The NSE, one of India's
two main stock exchanges, tweaked how it accounts for spun-off
companies in its various equity indexes in order to reduce churn
in their constituents.
The move comes as big companies such as HDFC Ltd and HDFC Bank are merging, with potential for entities
to be spun off, and Reliance Industries Ltd plans to
list Jio Financials separately.
The change will apply to any such spin-offs approved by
shareholders of the parent companies on or after April 30, the
NSE said in a circular late on Wednesday.
Currently, all newly listed entities are excluded from
indexes, and in cases of indexes with fixed constituents, are
replaced with another eligible stock.
But now, any newly listed spun-off businesses will be
initially included in a relevant index at a constant price,
which is the difference between the demerged firm's closing
price the day before the ex-demerger date and the price during a
special pre-open session on the ex-demerger date.
Then, three sessions later, this entity will be removed from
the index. If it hits the price band in the first two days, its
removal will be deferred by another three days, the NSE said.
"As the size of the domestic passive indices has grown
massively in past few years ... We are also seeing big index
constituents merging," Nuvama Alternative & Quantitative
Research said in a note.
"So it is an apt time to look at the best practices that
avoid unnecessary churning and make corporate action very
smooth."
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Janane
Venkatraman)
Messaging: nallur.sethuraman.thomsonreuters.com@reuters.net))
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