Spin-Off
The distribution of a subsidiary's shares to a parent's shareholders, creating a separately listed company.
How it is identified
Test: shares in the subsidiary are distributed to the parent's shareholders pro rata, without consideration
Unit
qualitative
In depth
A spin-off is closely related to a demerger and the terms are often used interchangeably in Indian practice, the distinction being largely one of legal mechanism. The economic logic is the same: separating a business so it can be valued, managed and financed on its own terms. Spun-off companies are frequently sold indiscriminately at listing by index funds and institutional holders whose mandates do not permit holding them, which creates a period of forced selling unrelated to the business. That mechanical pressure is why the segment has attracted academic attention as a source of mispricing.
Worked example
An index fund holding the parent receives shares in a spun-off company that is not in the index. It must sell regardless of price, and if enough holders face the same constraint the listing sees heavy supply for weeks.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Spin-Off” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.