Calculate your SIP ReturnsExplore
Listed companies in India often undertake corporate actions such as issuing bonus shares and stock splits. Both these steps increase the number of shares in the market while reducing the shares’ prices. As 2022 begins, these listed companies will likely announce bonus shares and stock splits in the next few weeks.
SBC Exports, IPCA Laboratories and Hinduja Global Solutions have communicated with the country’s stock exchanges. These companies will make a final decision about the stock split and bonus in their upcoming board meetings.
Now let us take a look at each of these companies.
SBC Exports
This Ghaziabad-based public limited company is engaged in multiple businesses, including textile manufacturing, metalwork, travel and IT. SBC Exports Limited is mainly known for manufacturing readymade garments and home furnishings like carpets, cushion covers and bedspreads. Incorporated in 2011, the company now has a gross turnover of over Rs. 30 crores.
The company has diversified its business into metalworking, producing aluminium ingots, zinc ingots etc. Its brand Mauji Trip offers transport tickets and hotel and vacation bookings. In addition, this company has experience in providing IT services, having worked with various government agencies like ILSIL, BECIL and NICSI.
SBC Exports has announced the possible discussion on stock splits and bonus shares in its board meeting on 7 January 2022. The meeting would also consider and discuss the possibilities of increasing the company’s authorised share capital and alternation to its Memorandum of Association.
As of 12:10 PM 5 January 2022, its shares were trading at Rs. 172.45 at a market cap of Rs. 182 crores.
IPCA Laboratories
Established in 1949, IPCA Laboratories sells its pharmaceutical formations and APIs in over 120 countries in Asia, Europe, Africa, Australia and the US. It is a fully-integrated Indian pharma company manufacturing over 350 formulations and 80 APIs.
This Mumbai-based MNC is the world’s largest manufacturer for over a dozen APIs. It is a market leader in antimalarials with a market share of over 34%. Drug regulatory authorities like FDA (Food and Drug Administration), UK’s MHRA, Australia’s TGA, Europe’s EDQM and WHO (World Health Organisation) approve its formulations and APIs.
In its latest communication with BSE, the pharmaceutical company has announced the approval of a 1:1 stock split on 11 January 2022. The company will split each fully paid-up equity share of Rs. 2 into two shares in its board meeting on 16 December 2021. No decision about the issuance of bonus shares has been made.
The shares of IPCA Laboratories were trading at Rs. 2204.15 as of 12:10 PM 5 January 2022.
Hinduja Global Solutions
A part of the Hinduja Group, this company is an international provider of business process management (BPM). It is a provider of outsourcing and customer experience (CX) solutions to a global clientele of Fortune 500 companies. The company employs 39,578 personnel in over 60 delivery centres across seven countries.
Hinduja Global Solutions offers technology-driven solutions in automation, analytics and digital with deep domain expertise. It provides access to back end processing, HRO centres, contact centres and customer care (traditional and digital) to deliver transformational impact. For FY2020, the company reported revenues of Rs. 52,354 million (US$ 737 million).
The IT company is likely to consider the issuance of bonus shares during its meeting of the Board of Directors scheduled on 6 January 2022. It has not yet announced any share split but may decide to issue an interim dividend.
As of 12:10 PM 5 January 2022, the shares of Hinduja Global Solutions Ltd were trading at Rs. 3613.95.
How Bonus Shares and Stock Splits Affect Shareholders’ Value?
A bonus issue refers to a stock dividend allotted by a company to its shareholders. These are free shares issued out of the company’s reserve to reward its shareholders. On the other hand, stock splits divide the stock’s face value as per the pre-decided ratio.
Both stock splits and bonus shares reduce the price of each share while increasing the number of shares with shareholders. Companies issue bonus shares to encourage more people to become investors. This is especially useful when new investors cannot invest due to higher prices of shares.
Different companies have different approaches to stock splits and bonus shares. Some maintain a traditional face value of stocks and only issue bonus shares. However, most companies prefer splitting the par value of the company as it does not affect the practical value.
Both of these corporate actions bring down the stock price into the popular trading range. Retail and small investors prefer to buy stocks at relatively low denominations. Moreover, they do not impact ROE (Return on Equity) while enhancing investors’ interest in the stock. Hence, most shareholders usually welcome bonus issuance and stock splits.
Source: Livemint
Frequently Asked Questions
Bonus issues and stock splits do not create any value intrinsically. However, they do bring in new investors and sustains shareholders’ interest over a longer period of time. They are instrumental in catalysing value discovery as it makes stocks more affordable.
Stocks are split based on their face value in proportions decided by the company. With a face value of Rs. 10, the stock split would change the stock’s face value to Rs. 2.5. If you held 1 share, it would now become 4 shares after the split.
The following companies have recently taken the above corporate actions:
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.
Enjoy Zero Brokerage on Equity Delivery
Join our 2 Cr+ happy customers
Get the link to download the App
Enjoy Zero Brokerage on
Equity Delivery
