LTIMindtree Lists On Dec. 5: All You Need To Know About Fractional Entitlement

LTI-Mindtree is set to become India’s fifth largest IT services company by market capitalisation.

<div class="paragraphs"><p>SN Subrahmanyan, MD &amp; CEO, at the LTI-Mindtree merger conference in Mumbai. (Photo: BQ Prime)</p></div>
SN Subrahmanyan, MD & CEO, at the LTI-Mindtree merger conference in Mumbai. (Photo: BQ Prime)

In one of the largest mergers in Indian information technology sector, L&T Infotech Ltd. and Mindtree Ltd. will begin to operate as a merged entity, LTIMindtree. The stock will list on the bourses on Dec. 5. The board has fixed Nov. 24 as the record date for determining the shareholders of Mindtree to whom equity shares of the combined company would be allotted. Mindtree will be suspended for trading from Nov. 23, a day prior to the record date, and the last trading day will be Nov. 22.

LTI-Mindtree will become India’s fifth largest IT services company by market capitalisation. After completion of the merger, Mindtree will be delisted from stock exchanges. L&T Infotech will continue to trade on the bourses and will be rebranded as LTIMindtree effective Nov. 24.

Here's all you need to know:

What's The Share-Swap Ratio?

A shareholder will get 73 fully paid-up shares of Re 1 each of LTIMindtree for every 100 shares of Rs 10 each of Mindtree. To be eligible for LTIMindtree shares, investors need to have Mindtree shares in the demat account on record date of Nov. 24. That means they should buy Mindtree shares on or before Nov 22, as settlement takes two days (T+2 settlement).

What Do Mindtree Investors Holding Fewer Than 100 Shares Get?

They, too, will get LTIMindtree shares. For every 10 shares of Mindtree, they will be allotted 7.3 (10*0.73) LTIMindtree shares. That means, such investors will get 7 shares of LTIMindtree, and 0.30 will be the fractional entitlement for which the amount will be credited to the bank account linked to the shareholder's demat account.

What Is Fractional Entitlement?

A fractional share is less than one full unit. Mergers and acquisitions create such fractional shares as companies combine new common stock using a predetermined ratio. Like in the case of LTIMindtree.

How Fractional Entitlement Will Affect Investors?

All fractional entitlements will be consolidated and equivalent shares of LTIMindtree will be allotted to a board-nominated trust. It will sell these shares within 90 days of the allotment, according to SEBI regulations, and pay the money to the investors after deducting brokerage, securities transaction tax and other charges in proportion to their respective entitlements.

What's The Tax Implication On Fractional Entitlement?

As a resident shareholder will not be charged any tax deducted at source in case of money received from fractional entitlements. A non-resident shareholder will have to pay 15.60% TDS. For those without or an invalid PAN, or a valid pan but didn't file income tax return for the previous year, the TDS rate will be higher at 31.20%.  

How Is The Value Of Fractional Entitlement Decided?

The value of fractional entitlement will correspond to the proportionate value of shares of LTIMindtree sold in the market by the trust.

How Will Be Fractional Entitlement Remitted? 

Sale proceeds arising out of fractional entitlement shall be credited to bank account of eligible shareholders of Mindtree, which is linked to their demat account. In case of bank account details are not updated in the demat account, a demand draft will be issued by LTIMindtree.

How Will LTIMindtree Shares Be Alloted?

LTIMindtree shares shall mandatorily be issued in demat form. In case shareholders of Mindtree do not dematerialise their shares prior to the record date of Nov. 24, then such shares will be credited to a suspense demat account to be opened by LTIMindtree . The shareholders can claim their shares of LTIMindtree from the suspense demat account after completing the documentation and requirements within the time prescribed by law.

When Will LTIMindtree List?

In the normal course, listing of new shares takes about two weeks from the record date. Accordingly, Mindtree shareholders will not be able to trade during this period. 

What Happens To Existing F&O Contracts Of Mindtree?

All existing F&O contracts -- November 2022, December 2022 and January 2023 -- will expire on Nov. 22, 2022, and will be physically settled. No new F&O contracts will be introduced for trading.