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Concepts: How the “Ex” Date and Record Date for Dividends, Splits and Demergers Works in India


When stock demerge, give dividends, or have a bonus or split, there is always two dates give. One is a “Record” date, and the other is what is called an “Ex”- Date.

It’s not apparent to investors what these dates mean. On our Adani Enterprises Demerger post, we got a few replies, asking that since the Record Date was Jun 4, 2015, will they get the “demerged” shares if they bought on Jun 3?

(Adani Enterprises went through a demerger after which shareholders got shares of three other companies. The Adani Enterprises share fell 80% on Jun 3, which was the “ex” date, but the record date was June 4)

The concept: the Record Date is the date when the list of shareholders is tabulated, and whoever is a current shareholder, will get the corporate action applied (dividend, bonus, split, etc).

But in India, stocks take two days to be transferred. You sell on Day 1, your shares get taken away from you on Day 2, and hit the buyer’s account on Day 3.

So, if you bought Adani on Jun 3, your account would see the shares only on Jun 5.

Therefore there is a two day cut-off for corporate actions. Any shares bought on Jun 3 or later will not be qualify for the demerger action, because they won’t be in the buyer’s account on Jun 4 (the Record Date). Therefore we have an “Ex” Date, which is one day before the record date. That means shares bought one day before the record date (or later) will not qualify.

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That means stock prices will adjust on the Ex Date, even if the record date is one day later.

Expert note: Do not buy the stock one day before the Ex-Date. This is a problem date, since you might not qualify for the corporate action for a weird problem. Brokers in India sometimes put stocks into their “pool” account before transferring to yours. In that case, the pool account becomes the owner on the Ex-Date. You then have to write to the broker to ensure that your demerged shares or dividends come to you. It’s very rare that such situations occur, but I have heard of them in the past.

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