Mergers and amalgamations
If a company whose shares you have pledged undergoes a merger or amalgamation, you will need to either replace those shares with another security from the approved list, or make a partial repayment on your loan. This keeps your LTV within permissible limits.
Zerodha Capital notifies you in advance of the record date so you have time to act. If no action is taken, Zerodha Capital may be compelled to invoke the pledge and sell the pledged securities, fully or partially, to cover the LTV shortfall.
For example, if company ABC merges with XYZ, the shares of ABC are extinguished after the merger. Equivalent XYZ shares are generally credited to the demat account 30 to 45 days after the record date, and appear in your portfolio only once they are officially listed on the exchange.
Demergers
In a demerger, the value of a company is split between the parent company and the newly created company. On the ex-date, the market price of the pledged parent stock usually falls to reflect this separation.
Since your collateral value is linked to the market price of your pledged securities, this drop can temporarily increase your LTV and create a shortfall. Zerodha Capital informs customers in advance about upcoming demergers and record dates.
If your LTV exceeds the permissible limit you may need to pledge additional approved securities, or make a partial loan repayment. If no action is taken, Zerodha Capital may invoke and sell part or all of the pledged securities to cover the shortfall.
Shares of the newly demerged company are usually credited only after 30 to 45 working days. Until they are listed and added to the approved securities list, they cannot be counted as collateral for your loan.