HUL Demerger: What happens to the stock ahead of the record date on Friday

As Hindustan Unilever's long-awaited demerger of its ice cream business nears the finish line, the market is preparing for a busy week of price adjustments, index reshuffles and derivative changes.

The stock heads into a crucial milestone on Friday, the record date for the separation of Kwality Wall's into a standalone listed entity.

HUL has fixed December 5 as the record date for the scheme of arrangement between HUL and Kwality Wall's. Shareholders will receive one share of the new company, Kwality Wal's, for every HUL share they hold, based on the 1:1 entitlement ratio.

In the derivatives segment, all existing HUL F&O contracts will expire at the end of the day on December 4. On the record date, both exchanges will run a special pre-opening session to discover the adjusted price of HUL after the spin-off.

This special session is normally announced four to seven days before the record date. Once price discovery is completed, exchanges will introduce fresh F&O contracts aligned with the new structure.

Index managers will also make temporary adjustments. MSCI and FTSE will include Kwility Wall's on the record date at the discovered price and later remove it once the new company begins trading.

Nifty and Sensex will follow a similar mechanism by adding the spun-off entity as a dummy stock at zero price alongside HUL on the day before the record date.

The price of this dummy security will reflect the difference between HUL's closing price on T-1 and the discovered price during the special session. If the discovered price equals or exceeds the previous close, the dummy stock will remain at zero. It will stay frozen at that level until Kwality Wall's actually lists.

The listing process itself could take up to a month as the new company secures regulatory approvals. Once listed, the exchanges will watch the stock's trading pattern before removing it from indices.

On the NSE, removal will take place after the third trading day, provided the stock does not hit its upper or lower price bands for two consecutive days. If it does hit the band, the exclusion is deferred until two consecutive stable sessions occur. After those two days, a press release is issued and removal follows after the next trading day.

On the BSE, the rule is similar but only the lower band is considered. If the stock hits the price band on the scheduled day of exclusion, the removal will still go ahead.

The coming week will therefore be crucial for traders tracking HUL, as the stock adjusts to one of its most major restructurings in years and the market prepares for the arrival of a new FMCG entity on the exchanges.

Note To Readers

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.