NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

Mergers, Demergers, Buyback and Delisting Processing by Depositories

Updated 11 October 2026 · Fact-checked

These are corporate restructuring events where the issuer changes or extinguishes securities. The depository acts on instructions from the issuer or its RTA. It debits old holdings, credits new shares or a new ISIN, extinguishes bought-back or delisted shares, and moves tendered shares to a settlement account. It does not decide terms.

Understand Mergers, Demergers, Buyback and Delisting Processing

A corporate restructuring changes the shares an investor holds. Examples are a merger, a demerger, a buyback and a delisting. The terms are decided by the company, its shareholders and regulators. The depository only records the result in demat accounts.

In a merger or amalgamation, one company (the transferor) combines into another (the transferee). The transferor's shares are extinguished. Its shareholders get shares of the transferee in the ratio set by the approved scheme. The issuer or its RTA sends the corporate action instruction to the depository once the scheme becomes effective. The depository then debits the old ISIN and credits the new one in each demat account, on a record date fixed by the company. The old ISIN is deactivated and closed at that time. The DP does not credit anything itself.

In a demerger, a part of a company's business moves to another company. Shareholders keep their existing shares and also get shares of the resulting company in the approved ratio. The depository credits the new company's shares, usually under a new ISIN, once the issuer confirms the entitlement. The old holding stays.

In a buyback, the company buys its own shares from shareholders. Shares bought back are extinguished, so the company's capital falls. When you tender shares in a tender offer through the exchange mechanism, they are transferred from your account to the clearing corporation's designated account through early pay-in. Accepted shares are extinguished and unaccepted shares are returned. In a delisting, shares stop being traded on an exchange. Investors who tender in a delisting offer, for example through reverse book building, do so through the exchange and clearing mechanism as specified in the offer document. Shares can stay in demat form after delisting.

For the exam, remember who acts. The issuer or RTA initiates, the depository executes the debit and credit, and the DP serves the investor. The investor's demat holding is the proof of entitlement on the record date.

Key formulas to remember

Swap ratio effect: New shares = Old shares × Entitlement ratio (rounded as per the scheme); Example: ratio 3:5 means 3 new shares for every 5 old. Fractions are handled as the scheme says, often by paying cash for fractional entitlements.
Merger entry: Debit old ISIN (transferor) → Credit new ISIN (transferee); Processed on the issuer or RTA's instruction after the scheme becomes effective. The old ISIN is deactivated and closed at that time.
Demerger entry: Original holding unchanged + Credit of resulting company shares; Nothing is debited from the original holding in a pure demerger.
Buyback entry: Tendered shares (exchange mechanism): Debit investor account → Credit clearing corporation's designated account (early pay-in) → accepted shares extinguished, unaccepted shares returned; Only accepted shares are extinguished. For a delisting offer, follow the mechanism in the offer document.
Record date rule: Entitlement depends on holding at close of record date; Check the date given in the question.

How to solve Mergers, Demergers, Buyback and Delisting Processing questions

Use this method for any question on restructuring events and depository processing.

1Identify the event: merger, demerger, buyback, tender or delisting.
2Decide who initiates it. It is normally the issuer or its RTA, not the DP or depository.
3Decide what happens to the old ISIN: closed in a merger, kept in a demerger, shares extinguished in an accepted buyback.
4Work out the debit and credit in the investor's account, applying the ratio if one is given.
5Check the date. Entitlement depends on the record date holding, or on the tender period for offers.
6Match the answer to the option which names the depository as executor, not decision maker.

Quickest way: Event, ISIN, Direction

When to use it: Use when the exam gives a short statement or a numerical on a restructuring event.

Name the event in one word.
Ask: is the old ISIN closed or kept?
Ask: is the shareholder receiving, giving up, or both?
Apply the ratio to the holding if given.
Pick the option where the issuer or RTA instructs and the depository only records.

Common mistakes in Mergers, Demergers, Buyback and Delisting Processing

Saying the depository decides the swap ratio or approves the scheme.
Students see the depository doing the credit and assume it controls the event.
Fix: The company and regulators decide terms. The depository only executes the instructions it receives.
Debiting the original shares in a demerger.
It is confused with a merger, where the old ISIN is closed.
Fix: In a demerger the existing holding stays and extra shares of the resulting company are credited.
Thinking all tendered shares in a buyback are extinguished.
Students forget acceptance can be partial.
Fix: Only accepted shares are extinguished. Unaccepted tendered shares go back to the investor.
Assuming delisted shares must be rematerialised.
Students link delisting with loss of electronic trading.
Fix: Delisting ends exchange trading. Shares can remain in demat form.
Ignoring the record date when calculating entitlement.
Students use today's holding instead of the date set by the company.
Fix: Use the holding at the close of the record date given in the question.

Worked examples

Example 1

A scheme of amalgamation gives 3 shares of the transferee company for every 5 shares of the transferor. On the record date you hold 1,000 shares of the transferor. How many shares are credited, and what happens to the old ISIN?

Show the solution

Event: merger, so the transferor's shares are extinguished.
Apply the ratio: 1,000 × 3 ÷ 5 = 600.
On the issuer or RTA's instruction after the scheme is effective, the depository debits 1,000 shares of the old ISIN.
It credits 600 shares of the transferee under its ISIN.
The old ISIN is deactivated and closed at that time.

Answer: 600 transferee shares are credited, 1,000 old shares are debited, and the old ISIN is closed.

Example 2

You tender 500 shares in a buyback tender offer through the exchange mechanism. 200 shares are accepted by the company. What happens to the 500 shares in your demat account?

Show the solution

On tendering, 500 shares move out of your account to the clearing corporation's designated account through early pay-in.
Acceptance is 200 shares.
The 200 accepted shares are used in the buyback and extinguished.
The remaining 300 unaccepted shares are returned to your demat account.
The company's share capital reduces by 200 shares.

Answer: 200 shares are extinguished and 300 shares are credited back to your account.

Exam tips

Look for who initiates the event. The issuer or RTA is the usual answer, not the DP.
Learn the contrast: merger closes the old ISIN, demerger keeps it, and a buyback extinguishes only accepted shares.
In ratio questions, multiply the holding by the ratio and apply the scheme's rounding rule.
Options saying the depository sets terms or approves the scheme are incorrect, so eliminate them. Also remember that NISM-Series-VI carries 25% negative marking, so a wrong answer costs marks.
Delisting ends trading, not demat holding, so rule out options that force rematerialisation.

Practice questions from Special Services - Public Offering / Corporate Actions

Mergers, Demergers, Buyback and Delisting Processing: frequently asked questions

What is the depository's role in a merger?

After the scheme becomes effective, the depository debits the old ISIN and credits the new shares in each demat account. It acts on the issuer or RTA's instructions. It does not decide the ratio or the terms.

Does ISIN change after a merger?

Yes. Holders of the transferor company receive shares under the transferee's ISIN. The old ISIN is deactivated and closed once the scheme is effective and the corporate action is processed. The transferee's ISIN itself usually stays the same.

How are shares tendered in a buyback or open offer in demat form?

In an exchange-mechanism tender offer, your shares are transferred to the clearing corporation's designated account through early pay-in, as set out in the offer process. Accepted shares are used in the offer. Unaccepted shares are returned to your account.

What happens to my demat shares after delisting?

The shares stop trading on the exchange but can stay in your demat account. Investors who tender in a delisting offer do so through the exchange and clearing mechanism specified in the offer document.