Why Bajaj Finserv has announced stock split, bonus shares issue & what it means for shareholders, investors
- Bajaj Finserv's board approved stock split and bonus shares issue in the board meet today
In a reward to its shareholders, Financial services company Bajaj Finserv on Thursday announced that its board has approved the proposal of sub division of equity shares as well as the issue of bonus shares. The stock of the company zoomed over 9% on the BSE after the announcements along with its Q1FY23 results.
Explaining the rationale behind the stock split and issue of bonus shares, Bajaj Finserv said that the company and it's subsidiaries have grown significantly, in terms of business and performance, over the years. This is reflected in the share price of the Company, which touched a peak of Rs. 19,325 in October 2021.
The price since then has hovered around ₹12,200. Currently the retail/individual shareholders comprise 98% of the total number of shareholders holding around 17.52% of paid-up value of shares. Amongst its peers, the share price of the company is one of the highest while having one of the smallest capital bases.
"As and when the stock price rises further, it will be increasingly difficult for small potential shareholders to partake in the company's future. Keeping with the spirit of inclusion and in order to reward the shareholders. the Board of Directors. at its meeting held today, approved and recommended the said corporate actions," Bajaj Finserv said.
A stock split increases the number of shares that are outstanding by issuing more shares to the current shareholders. Stock split decreases the market price of the individual shares, however, does not result in changing the market capitalization of the company.
A company engages in stock split decision to make its stock more affordable if its price levels are very high, which in thus would lead to increase in liquidity in the stock. For example, in Bajaj Finserv' 1:5 stock split, for every 1 share held by a shareholder, it will become 5 shares.
Meanwhile, bonus shares are fully paid additional shares issued by a company to its existing shareholders. Many companies take the decision for bonus issue when they are not in the position to pay a dividend to its shareholders despite earning decent profits for the respective quarter. Bajaj Finserv has announced bonus issue in the ratio of 1:1 which means for every 1 share held by, the shareholder will get one extra bonus share.
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