Bajaj Finserv Ltd has announced a 5:1 Stock Split and 1:1 Bonus Shares
The board of directors of Bajaj Finserv Ltd has approved and announced a 5:1 stock split and 1:1 bonus shares. Following the stock split, the company's authorized share capital would increase to 1 billion equity shares with a face value of Rs. 1 each. The number of fully paid and subscribed shares will grow to 9.64 crores at the same face value. The authorized capital will eventually increase to 2 billion equity shares with a face value of Re 1 following the issuing of bonus shares. A total of 1.59 billion Re 1 share will be added to the total paid-up and subscribed capital.
Let us First Understand What is a Stock Split?
A corporation may decide to split its shares into a number of new ones in a stock split. Split shares do not diminish the shareholders' ownership position or create any new value for them. However, what they actually do is increase the number of shares of the company. Meanwhile, the face value of the shares is reduced during a split. However, the investment's overall worth stays constant.
The major advantage of a stock split is that it makes the share price more affordable for retail investors. This indicates positive sentiment of the share. Since shares are now more readily available to regular investors, there will likely be a greater demand for them, which will enhance the amount of liquidity on the market.
Why has Bajaj Finserv considered a Stock Split?
The company's business has expanded substantially over the years, and this is reflected in the share price. Bajaj Finserv's share price reached Rs 19,325 in October 2021. 98% of the total number of its shareholders are retail investors. The company signaled that it would become more challenging for retail investors to buy even a single share if the price rose from its current levels. In order to make shares more affordable to retail investors, the company is splitting shares.
What is a Bonus Issue?
An offer of free extra shares to existing shareholders is known as a bonus issue, often referred to as a scrip issue or a capitalization issue. As an alternative to increasing the dividend payout, a firm may elect to distribute more shares. Bajaj Finserv for instance provides one bonus share for one share owned.
Who is eligible for the Bajaj Finserv stock split and bonus share?
Investors who owned Bajaj Finserv prior to the record date are eligible for the stock split and bonus shares.
But what if you buy a share on 12 Sep? Since our system follows a t+2 settlement cycle you can get shares in your portfolio through a demat account by September 14, making you eligible for the bonus and the split.
Understanding its Financials:
Positives
1. The company has had a ROA of 11.56% during the past three years.
2.The company's operating income increased considerably during the last three years, with a CAGR of 13.82%.
3.Promoters own 60.76% of the stock.
4. The consolidated net profit of Bajaj Finserv for the three months ending in June 2022 increased by 57% to Rs 13.1 billion.
5. The Bajaj Group firm reported a profit of Rs. 8.3 billion last year.
6. The reviewed quarter's revenues totaled Rs 158.9 bn, an increase of 145 year-on-year growth (YoY).
7. Its subsidiary Bajaj Alliance's gross written premium climbed by 255 to Rs 31.2 billion during the quarter.
Negatives
- The stock price is trading at 62.81 times the book value.
- The PAT margin decreased by 30.29%.
Status of Bajaj Finserv Share
The share price of the stocks reached a 52-week high of Rs. 19325 a share in October 2021. On June 30, 2022, the 52-week low was Rs. 10727. Bajaj Finserv delivered has delivered, a 5-year return of about 204 percent. Moreover, it delivered returns of more than 2600 percent from the original stock price of Rs. 500 to Rs. 1790.
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