How RIL F&O positions get adjusted post demerger

RIL demerges financial services

In a recent board meeting, Reliance Industries shareholders approved the long-awaited RIL demerger of its financial services arm. This division currently operates under Reliance Strategic Investments Ltd, a systemically important NBFC. As per the announcement, the record date was set for July 20, 2023, meaning shareholders needed to hold RIL shares in their demat accounts by then to be eligible for the demerger benefits.

This major move, widely covered in RIL demerger news, marks a strategic shift to unlock value from the group’s financial services business. Investors are closely watching RIL demerger 2025 details and impact on shareholders, expecting improved transparency and potential value creation through focused business operations.

Table of Contents

1. RIL demerges financial services
2. How is the demerger deal structured?
3. Why adjustment in F&O for the demerger?
4. What if you hold Reliance call options on July 19, 2023?

How is the demerger deal structured?

The RIL demerger involves separating its financial arm, Reliance Strategic Investments Ltd, into a new entity through a scheme of arrangement. Shareholders will receive 1 share of Reliance Strategic Investments Ltd (face value ₹10) for every 1 share of RIL (face value ₹10)—a 1:1 ratio. The demerged entity will be renamed Jio Financial Services Ltd.

The scheme is effective from July 1, 2023, with a record date of July 20, 2023. As per recent RIL demerger news, this move aims to unlock value and streamline business focus. Investors tracking RIL demerger 2025 details and impact on shareholders expect long-term benefits from the standalone financial entity.

Why adjustment in F&O for the demerger?

The RIL demerger of its financial arm into Jio Financial Services will reduce RIL’s overall value, as part of it shifts to the new entity. Shareholders will receive Jio Financial Services shares in a 1:1 ratio, adjusting their holdings accordingly. This will impact RIL’s valuation and shareholding structure, as they now hold shares in both companies.

Unlike a bonus or split, F&O adjustments for this RIL demerger are value-based, not ratio-based. According to the latest RIL demerger news, the F&O contracts will be adjusted based on the derived value of Jio Financial Services. Investors analyzing RIL demerger 2025 details and impact on shareholders should consider these valuation shifts and how they affect derivatives positions.

• To give effect to this merger, all F&O contracts of Reliance Industries with expiries slated on July 27, 2023, August 31, 2023 and September 28, 2023 will automatically expire on July 19, 2023 which is the last cum-date for the scheme of arrangement as the stock goes ex-demerger on July 20, 2023. The methodology of the settlement will be based on the valuation and price movement and would only be intimated at a later date.
   
• The same derivative contracts that expired on July 19, 2020 for the expiries of July 27, 2023, August 31, 2023 and September 28, 2023, will once again be introduced on July 20, 2023. The strike prices on which options trading will be made available from July 20, 2023, onwards would be separately made available to the traders based on the price moves and valuation moves in the next one week. 
   
• While the futures pricing appears to be more straightforward, the question is how will the options strikes be introduced after giving effect to the demerger of Jio Financial? Once the price is determined post the opening of capital market trading on July 20, 2023, a minimum of 5 in-the-money (ITM) strikes, 5 out of the money (OTM) strikes and 1 at the money (ATM) strike will be introduced and made available. They will be intimated post trading on July 19, 2023 to the members.
   
• Further strike price introduction for Reliance Industries Ltd post demerger will be based on the price movement on July 20, 2023. These additional strikes will be introduced by the stock exchange even during the trading hours if the price moves so warranted. 

What if you hold Reliance call options on July 19, 2023?

That is the more practical question. What exactly happens if you are (say) long a Reliance Industries OTM call option as on July 19, 2023. Here are the steps that describe the outcome.

• All the existing monthly and weekly contracts open in the underlying RELIANCE with expiry dates post July 19, 2023 (July, August, September), will automatically expire on July 19, 2023. That would also include the call option held by you.
   
• The settlement price for the purpose of final settlement will be the settlement price of security RELIANCE in the Capital Market segment, on July 19, 2023. For this particular settlement, the pay in/ pay out of final MTM settlement of all Futures contracts on RELIANCE will happen on July 20, 2023, which is the T+1 day.
   
• Consequently, all positions in the existing futures and options contracts on the underlying RELIANCE will cease to exist post the final settlement on July 19, 2023, and it must be noted here that this will result in physical settlement.
   
• However, it must also be noted that such physical obligations of F&O segment will be netted with obligation in the Capital market for July 19, 2023 and will be settled in the capital market segment on July 20, 2023. Also, any delivery shortages would be automatically closed out.

To sum it up, the demerger will lead to a shift in value, although it should be holdings neutral for the shareholders of Reliance Industries.