2:1 bonus shares, 1:10 stock split: SME stock Sarveshwar Foods gives 200% return to IPO allottees in 6 years
- Multibagger stock: This NSE SME IPO was launched in March 2018 at a price band of ₹83 to ₹85 per equity share
2:1 bonus shares, 1:10 stock split effect: For an intelligent stock market investor, the initial public offering (IPO) investment strategy is not much different from the stock investment strategy because investing in an IPO is like investing in a stock. One should hold the stock after share allocation for as long as possible. This enables an investor to get a compounding benefit as one gets income from the income earned from one's investment amount. Apart from this, a long-term investor enjoys the benefit of various rewards that a listed company announces post-listing in the form of dividends, bonus shares, buyback of shares, stock split, etc.
To understand how a long-term view on an IPO may fetch profit for an allottee, let's look at the example of the Sarveshwar Foods IPO. This NSE SME IPO was launched in March 2018 at a price band of ₹83 to ₹85 per equity share. The SME stock listed on the NSE SME Emerge platform at a discount of ₹2 per share against the upper price band of ₹85 apiece and went on to further lose its sheen on the listing date. However, if an investor had persisted with its conviction regarding this SME stock and it had remained invested in the stock post-weak listing, one would have benefited from the 2:1 bonus shares and 1:10 stock split that the company declared in September 2023. On 15th September 2023, Sarveshwar Foods share price traded ex-bonus and ex-split to finalize the list of eligible shareholders of the company for issuance of 2:1 bonus shares and 1:10 stock split benefits.
Bonus shares effect
As per the information available on the BSE website, Sarveshwar Foods' share price was traded ex-bonus on 15th September 2023 to finalize the beneficiary shareholding of the company for issuance of bonus shares in a 2:1 ratio. Means two bonus shares for each company share held by the eligible shareholder. So, if an allottee had remained invested in the scrip despite a weak listing of the SME IPO, the total shareholding of the allottee would have risen three times to 4,800 [{(2 +1) / 1} x 1,600].
Stock split effect
The BSE website further informs that the SME stock traded ex-split on the same date to ascertain the eligible shareholders for a 1:10 stock split. So, if an allottee had remained invested in the SME stock till today, its total shareholding would have risen to 48,000 (4,800 x 10) after the stock split.
₹1.36 lakh turns to ₹4.22 lakh
Sarveshwar Foods share price is currently quoting ₹8.80 apiece. If an allottee had remained invested in this SME stock till date, the absolute value of one's investment had been ₹4,22,400 or ₹4.22 lakh. As one log of the SME IPO comprised 1600 shares, an allottee's minimum investment would have been ₹1.36 lakh ( ₹1600 x ₹85). This means, an allottees of ₹1.36 lakh would have risen over 200 percent to ₹4.22 lakh in six years. Provided the allottee had remained invested in the scrip throughout these six years despite the weak listing of shares.
Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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