1:2 stock split, two bonus issues: Multibagger SME IPO turns ₹1.2 lakh to ₹1.40 crore in seven years
Multibagger stock: A long term investor not just earn from stock movement only. A listed company shares its profit with its shareholders using its capital reserves. The listed companies reward its loyal investors by announcing dividend, bonus shares, stock split, rights issue, buyback of shares, etc. In case of dividend, a shareholder of the company received the reward amount directly in one’s bank account without booking any profit whereas in the case of bonus shares, stock split, etc. a shareholders shareholding increases and then movement in the stock gives him or her higher return on one’s investment.
To understand how bonus shares, stock split can reward a long term investor, we need to look at the journey of Lancer Container Lines since its IPO launch. The public issue of this logistics service provider company was launched in March 2016 at a price band of ₹12 per share. A bidder was allowed to apply in lots and one log of this fixed price issue was comprising 10,000 company shares. This means minimum investment in this SME IPO was ₹1.20 lakh. The public issue was proposed for listing on BSE SME exchange and the SME stock listed on BSE SME exchange at ₹12.60 per equity share, delivering around 5 per cent listing premium to its lucky allottees. However, for those allottees, who remained invested in this SME stock despite par listing, the company had much to offer in upcoming years.
Two bonus issues
After par listing on BSE SME exchange, the SME stock declared bonus shares on two occasions. After listing in April 2016, the BSE SME stock declared bonus shares in 2018. The board of directors of the SME company declared issuance of bonus shares in 3:5 ratio, which means three bonus shares for every five stocks held by the eligible shareholders. So, if an allottee had remained invested in this SME stock after listing, its shareholding in the stock would have gone up to 16,000 [10,000 x {(3 + 5)/5}].
Later on, in October 2021, this SME stock once again announced bonus shares in 2:1 ratio, which means two bonus shares for every one share held by the eligible shareholder of the company. So, after the issuance of 2:1 bonus shares, net shareholding of the IPO allottee would have gone to 48,000 [16,000 x {(2 + 1) / 1}].
1:2 stock split
The SME company didn’t end here only. In December 2022, the small-cap stock declared stock split from face value of ₹10 per share to ₹5 per equity share. This means, stock split in 1:2 ratio. So, net shareholding of the allottee after above mentioned bonus shares would have grown to 96,000 (48,000 x 2).
₹1.2 lakh turns to ₹1.40 crore
Lancer Container Lines IPO was launched at ₹12 per share and one lot of the IPO comprised 10,000 shares. This means, net investment by an allottee in this fixed price offer was ₹1.20 lakh (10,000 x 12). After availing benefit of two bonus issues (3:5 in 2018 and 2:1 in 2021) and one stock split (1:2 in 2022), these 10,000 shares of the allottee surged to 96,000.
Lancer Container Lines share price today is ₹145.80 apiece. This means, absolute value of ₹1.20 would have surged to ₹1,39,96,800 (96,000 x ₹145.80) i.e. around ₹1.40 crore.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 18 Jul 2023, 02:30 PM IST
Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.