Knowledge Base

A spin-off is when a company separates one of its businesses or divisions into a new independent company. Existing shareholders of the parent company receive shares of the new company at no additional cost and in proportion to their holding as of the record date.

Companies do this to unlock value from a division that may be undervalued within the larger company, to allow each business to focus independently on its own strategy, to separate a high-growth business from a mature one, or to simplify the parent company’s structure.

Your shares in the parent company remain as they are. In addition, shares of the newly spun-off entity are credited to your DEMAT automatically. The parent company’s stock price typically adjusts downward to reflect the value that has been separated out. Spin-offs are mandatory corporate actions, no action is required from your end.