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Jsw Ispat Share Price

coincollective19

I think I stumbled onto a live, retail-sized merger-arbitrage case and would love a sanity check from folks who’ve actually done this in India. Watching the JSW Ispat Special Products share price vs JSW Steel, it seems to loosely track an implied swap parity around the merger/corporate actions, but the spread moves more than I expected. This looks “simple” on paper, but the mechanics for a small investor feel messy.

Questions I can’t find clean answers to:

Calculating real-world parity: Beyond the headline swap ratio, how do you adjust for stamp duty, STT, brokerage, and expected tax treatment so the parity you trade is apples-to-apples? Any template you use to avoid false signals?
Hedging without liquid F&O: If the smaller leg is T2T or lacks futures, how are you hedging the parent/target? Anyone using SLB (stock lending/borrowing) on the India exchanges to short the parent leg? How bad are borrow costs/recall risks in practice?
Settlement timeline and IRR: From record date to credit of new shares and ability to sell, what timeline do you budget for? In your backtests, how much does this lag crush IRR vs the headline spread?
Circuit limits and liquidity traps: Practical tips to avoid getting stuck near record dates when volumes dry up or daily circuits hit? Any rules of thumb on minimum spread you demand to compensate for execution friction?
Tax treatment of the swap: If it’s a court-approved merger, is the share exchange tax neutral at swap time? Does the holding period “tack” onto the new parent shares for LTCG purposes, and how do you compute the cost basis you’ll use on exit? Any past examples where the AO treated it differently?
Odd lots and fractional entitlements: How are fractions settled (cash vs consolidated lots later)? Any hidden costs or delays that matter to small accounts?
Basis risk from the steel cycle: Since steel spreads can swing with ore/coking coal, how do you manage the underlying beta if the spread blows out while you wait for the corporate timeline?
Data and tooling: Anyone willing to share a simple parity tracker (Google Sheets or Python) that ingests live quotes of both legs and flags when the spread clears fees/taxes? Free data sources that are “good enough”?

If you’ve traded the JSW Ispat vs JSW Steel situation specifically, what were the gotchas you wish you’d known? If the safe answer is “skip arb and just own the parent,” I’m also curious why-governance, delays, or the steel cycle swamping the spread?

This seems like an awesome learning case for retail-friendly merger arb in India, but I don’t want to mistake a mirage for free money.

wealthwave78

Couple of practical notes from doing a few court‑approved swaps here, incl. steel names:

Parity calc (back‑of‑envelope): Net spread ≈ [SwapRatio × P(JSW Steel) − P(JSW Ispat)]/P(JSW Ispat) − round‑trip costs − hedge carry. For delivery trades assume per leg: STT ₀.10%, stamp duty on buy ₀.015%, exch/SEBI/GST etc. ₀.02-0.04%. If you’re long target and short parent via futures, add futures impact cost/roll and funding (usually a small positive carry). If short via SLB, add borrow fee pro‑rata and expected dividend pass‑through.
Hedging when smaller leg lacks F&O: Short JSW Steel futures sized to the swap ratio is the cleanest; it leaves you with lower borrow risk than SLB and no dividend outflow (dividend is in the basis). SLB on JSW Steel is doable but borrow is scarce/volatile into record dates; I’ve seen 2-6% annualized go to double digits for a few weeks. Recalls do happen around corporate events; you’ll need a broker who actively manages SLB exceptions.
Timelines/IRR reality: Budget 30-45 calendar days from record date to listing/trade‑ability of new shares; 10-20 trading days is “good case,” but 60 isn’t rare if exchanges ask for clarifications. That time drag can cut a headline 5% spread to a mid‑teens annualized IRR quickly, and zero it out if you hit circuits on the target.
Circuit/liquidity traps: Don’t chase into the last week pre‑record; spreads look juiciest when you’re least able to exit. I demand >3% net if I can hedge with futures; >5-6% if I’m forced into SLB/T2T. Place resting limits for staggered fills; avoid market orders near open/close.
Tax on the swap: Court/NCLT approved amalgamation into an Indian company is typically tax‑neutral at swap (Sec 47(vii)). Holding period tacks (Sec 2(42A) Expl. 1) and cost carries over (Sec 49(2) - your old cost becomes the new cost, proportionate if partial). Fractions settled in cash are taxable CG with proportionate cost. Keep the scheme + RTA statement; that’s what AOs look for if queried.
Odd lots/fractions: Schemes usually consolidate fractions, sell in market, and credit net cash; expect a small lag (2-8 weeks) and negligible amount, but it does delay “closing the book” for tiny accounts.
Steel beta risk: If the spread widens with the metal cycle, futures hedge against JSW Steel neutralizes most of it. If you hedge with Nifty Metal futures or Nifty50, run a quick beta to size the hedge; otherwise you’ll wear basis risk you didn’t price.
Tools: A simple sheet does the job. Inputs: live P(JSW Steel), P(JSW Ispat), swap ratio, fee bps per leg, hedge method (futures vs SLB), borrow/dividend assumptions, and an assumed completion date to annualize IRR. GOOGLEFINANCE is “good enough” for live quotes; for reliability, pull NSE bhavcopy daily and refresh the parity off that. NSE SLB page shows current borrow availability/rates.

JSW Ispat/JSW Steel specific gotchas I noted: spread tightened sharply right after key approvals and blew out around announcement/record chatter; borrow on JSW Steel got expensive into the event week; and one dividend timing rumor moved the futures basis more than the cash. If you’re not getting a clean >3% after your costs with a futures hedge and a 45‑day timeline, it’s not worth the operational grief. Owning the parent outright has fewer ways to be wrong.