Demerger of Company Shares: Record Date, Cost Split and What Lands in Your Demat

On April 29, 2026, Vedanta closed at ₹773.25 on the BSE. The next morning, after a special price discovery session, the same share opened at ₹290.50. Nobody lost ₹480 a share. Four businesses had simply walked out of the parent and taken their value with them, and every shareholder was owed one share of each. That’s the demerger of company shares in one frame, and it’s the corporate action that confuses retail investors most: the price “crash”, the empty-looking demat for a few weeks, and then a tax question that nobody seems to answer clearly.

We’ll take it in the order you’ll actually meet it. First the dates, then what happens to the price, then what lands in your demat, and finally the cost split that decides how much tax you pay when you sell. Two real cases do the heavy lifting: ITC Hotels coming out of ITC in January 2025, and Vedanta splitting into five listed companies in 2026.

What a demerger of company shares actually means for you

In a demerger, a listed company carves out one or more businesses into separate companies, called resulting companies, and pays its own shareholders for them in shares. You don’t pay anything and you don’t apply for anything. If your name is on the register on the record date, you get shares of the new company in a fixed ratio, and you keep your shares of the parent.

The ratio is set in the scheme the NCLT approves. ITC’s was 1 ITC Hotels share for every 10 ITC shares, with the record date on January 6, 2025. Vedanta’s was much bigger: for every one Vedanta share, holders on the record date of May 1, 2026 got one share each of Vedanta Aluminium Metal, Talwandi Sabo Power, Malco Energy and Vedanta Iron and Steel, according to Vedanta’s cost apportionment note to the exchanges.

Here’s the part people miss. Your wealth on day one doesn’t change. It just gets spread across more tickers. If the parent was worth ₹100 to you yesterday, it’s now the parent plus the new companies, still roughly ₹100 before the market starts having opinions about each piece.

Record date, ex-date and the T+1 trap

Indian equities settle on T+1, so you must own the shares at the end of the day before the ex-date to qualify. The record date is when the company checks the register; the ex-date is the first day the stock trades without the entitlement.

Vedanta had a twist. Its record date, May 1, 2026, was a market holiday for Maharashtra Day, so April 30 became the ex-date. Zerodha’s explainer for Vedanta holders put it plainly: to be eligible, you had to have bought on or before April 29. Buy on April 30 and you got the slimmed-down Vedanta only.

If you hold futures or options on the parent, check the exchange circular too. Zerodha’s note says Vedanta’s existing F&O contracts for May, June and July all expired on April 29, 2026, and were reintroduced from April 30 with a revised lot size after the pre-open session. That’s a forced exit you want to know about a week ahead, not on the morning.

Why the parent’s price “falls” on the ex-date

The exchange has to find a fresh price for a parent that’s now a smaller business. For stocks that have derivatives and are going through a demerger or similar restructuring, NSE runs a special pre-open session on the ex-date. Order entry runs from 9:00 am to 9:45 am, with a random close somewhere in the last ten minutes, only limit orders are accepted, and all matching happens at one equilibrium price. Normal trading starts after a buffer that ends at 10:00 am. If no price is discovered, the outstanding orders are cancelled and the stock keeps trading in the special session until a price is found. Our piece on the regular NSE pre-open session explains how that call auction picks a single price.

For Vedanta, Livemint’s live coverage reported a discovered price of ₹290.50 on the BSE and ₹289.50 on the NSE on April 30, against the BSE close of ₹773.25 the previous day. The gap on the BSE, ₹482.75 a share, is what the market was implicitly assigning to the four businesses that left. The stock then slipped through the day and closed at ₹273.30 on the BSE.

A demerger doesn’t change what you own on day one. It changes how many lines your holding is written on.

Your broker app may show a scary red number that morning. Ignore it until the new shares are credited. The “loss” is sitting in companies that haven’t shown up in your account yet.

What lands in your demat, and when

The new shares don’t arrive on the record date. The resulting company has to allot them, the depositories have to credit them, and the exchanges have to approve listing. Zerodha’s Vedanta note says crediting and listing typically take 30 to 45 days from the record date, and that CDSL emails you once the shares are in.

During that window you hold an asset you can see on paper but can’t sell. Plan for that. If you were counting on selling the parent after the ex-date to raise cash, remember that you’ll only get the parent’s reduced price; the rest of your money is parked until listing day.

Also watch the ratio when it isn’t 1:1. With ITC’s 1-for-10 ratio, a holding of 25 ITC shares works out to an entitlement of 2.5 ITC Hotels shares. You can’t hold half a share in demat, so check the scheme document for how fractional entitlements are dealt with. Odd-sized holdings are exactly where small shareholders lose track of value.

The cost split: the number your tax depends on

This is the bit that matters at tax time. Getting the new shares isn’t a sale. Zerodha’s note says receiving shares in a demerger is not a taxable event and tax applies only when you sell. ITC’s note says the same thing in legal terms: under Section 47(vid) of the Income-tax Act, 1961, the issue of ITC Hotels shares under the scheme was not regarded as a transfer.

But when you do sell, you need a purchase cost for each piece. You can’t use your full original cost twice. The law splits it. Under the Income-tax Act, 2025, which applies from April 1, 2026, Section 73(1) sets the cost of shares in the resulting company with a simple formula:

Cost of new shares = A × B ÷ C, where A is your cost of the shares in the demerged company, B is the net book value of the assets transferred in the demerger, and C is the net worth of the demerged company immediately before the demerger. Your cost of the original shares is then reduced by the amount moved to the new shares. ITC’s January 2025 note, written under the old 1961 Act, made the same kind of split for its shareholders.

Notice what drives the split: book values, not market prices. Companies do the arithmetic and publish the percentages, so you don’t need to dig through the balance sheet yourself. ITC published 86.49% for ITC and 13.51% for ITC Hotels. Vedanta’s note, which cites Section 73 of the 2025 Act, gives these shares of your original cost:

They add up to exactly 100%. Here’s something worth chewing on. On the ex-date the market left the parent with about 37.6% of its old BSE price (₹290.50 out of ₹773.25), yet the tax rules leave it with 52.34% of your cost. Those two numbers measure different things. The market prices future earnings; the tax ratio follows book value. Don’t use one in place of the other.

Worked example 1: splitting your Vedanta cost

Say you bought 100 Vedanta shares at ₹500 each, a total cost of ₹50,000. The purchase price is made up for the example; the percentages are Vedanta’s published ones. After the demerger you hold 100 shares of each of the five companies.

The five per-share costs add back to your original ₹500. That’s the sanity check. If your tax statement shows a figure for the parent that’s still ₹500, or shows the new shares at zero cost, it hasn’t been updated and you’ll overpay tax when you sell. Zerodha said it would update its own records automatically once the ratio was announced, but check your broker’s tax P&L anyway, especially if you moved shares between brokers.

Worked example 2: the ITC Hotels sale nobody calculated

ITC’s own illustration takes 1,000 ITC shares bought at ₹400 each, a cost of ₹4,00,000. The investor receives 100 ITC Hotels shares. Apply the published ratio and ₹3,45,960 stays with the 1,000 ITC shares (₹345.96 a share) and ₹54,040 moves to the 100 ITC Hotels shares, which works out to ₹540.40 a share.

Now suppose, purely hypothetically, that the investor sells those 100 ITC Hotels shares at ₹200 each, for ₹20,000. With the correct cost of ₹54,040, that’s a capital loss of ₹34,040, not a ₹20,000 gain. Someone who treats the new shares as free would report a gain and pay tax on money they never made. Flip it around and you see the other mistake: forget to cut the parent’s cost down to ₹345.96 a share and you’ll understate the gain when you sell ITC later.

Treat demerged shares as free and you’ll pay tax on money you never made.

Worked example 3: running the formula yourself

Sometimes a smaller company is slow to publish the ratio, or you want to check it. Take a made-up company whose net worth just before the demerger is ₹2,000 crore, and which transfers assets with a net book value of ₹500 crore to the new company. B ÷ C is 500 ÷ 2,000, or 25%.

If your shares in the parent cost ₹1,20,000, the new company’s shares get 25% of that, ₹30,000, and the parent’s cost drops to ₹90,000. Same total, two lines. In practice, use the company’s published figure; its accountants have the exact book values, and it’s what your broker will use too.

Holding period: the clock doesn’t restart

Good news here. The new shares take the purchase date of your original shares. ITC’s note cited Explanation 1(i)(g) to Section 2(42A) of the 1961 Act for this, and Zerodha’s Vedanta note says the holding period for the new shares counts from your original Vedanta purchase date, not the demerger date.

So if you bought the parent two years ago, the resulting company’s shares are long-term the day they’re credited. Zerodha’s note gives the current rates: long-term gains on listed shares held over a year are taxed at 12.5% on gains above ₹1.25 lakh, and short-term gains at 20%. Check those against your own situation before you sell; tax rules change and the right answer depends on your total income.

A checklist for your next demerger

1. Note the record date and work out the ex-date. With T+1, you must buy at least one trading day before the ex-date, and watch for holidays like Vedanta’s May 1.
2. If you trade the stock’s F&O, read the exchange circular for early expiry and revised lot sizes.
3. Don’t panic at the ex-date price. Compare the previous close with the discovered price to see what the market is assigning to the carved-out business.
4. Expect a gap of weeks before the new shares are credited and listed. Don’t plan cash needs around them.
5. Download the company’s cost-of-acquisition note from its website or the exchange filings and save it with your tax papers.
6. Split your original cost using the published percentages, check that the pieces add back to your original cost, and compare with your broker’s tax statement.
7. Remember the holding period carries over from your original purchase.

If you want a refresher on why the share count and face value of the new company don’t tell you much about its worth, read our explainer on face value of a share. And once the new companies start reporting on their own, our guide on how to analyse quarterly results of a company will help you judge each piece separately, which is the whole point of a demerger in the first place.

Disclaimer: This article is for educational purposes only and is not investment or tax advice. ITC and Vedanta details are taken from the companies’ cost apportionment notes, NSE’s special pre-open session page, Livemint’s April 30, 2026 coverage and Zerodha’s Vedanta explainer, all linked above and checked on October 21, 2026. The purchase prices, sale price and the company in example 3 are made up to show the method. Companies’ own tax guidance is general and the tax authorities can take a different view. Investing in equities involves risk of loss. Please do your own research and consult a SEBI-registered investment adviser or a tax professional before making any decision.