Bajaj Finserv stock split
Bajaj Finserv shares have started to trade ex-split in the ratio of 1:5 and ex-bonus in the ratio of 1:1 from September 13, 2022. It implies that the current shares of Bajaj Finserv which were earlier trading at aFace Value of Rs.5 will now trade at Rs1 from the ex-split date of September, 13, splitting the shares in the ratio of 1:5.
For Example, Each shareholder of 1 share of Rs. 5 will now have 5 shares of Rs.1. In addition to it, Bajaj Finserv also issued bonus shares to its existing shareholders till the split date in the ratio of 1:1,
After the initial split of shares in the ratio 1:5 and further issuance of bonus shares in the ratio 1:1, now the shares of Bajaj Finserv split in the ratio of 1:10. It implies that now the holder of 1 share of Bajaj Finserv of the value of Rs.10 will now have 10 shares of the value of Rs.1.
Theshares of Bajaj Finserv rallied 11% crossing the Rs. 17,000 mark in just more than a month when the Board announced in late July that they will split the stocks of Bajaj Finserv in the ratio of 1:5 and issued bonus shares.
Bajaj Finserv is the country’s leading NBFC and one of the most diversified players in the financial sector with a substantial presence in the insurance and wealth management sector.
On September, 13 the shares of Bajaj Finserv which were earlier trading at Rs. 17,000 are now at Rs, 1,795 per share after the split. Due to the split, shares are now more affordable for small retail investors and are more liquid. The shares of Bajaj Finserv have been in demand since the news of the split broke out and after the split, it has been in the buy recommendations of the majority of the market analysts.
Bajaj Finserv stock prices went up by 10 percent to Rs 14,579 on the BSE after the board agreed to split the shares in the ratio 1:5 and issue bonus shares in the ratio 1:1. On July 28, 2022, it was announced by the board that going forward the face value of existing shares will be subdivided in the ratio of 1:5 implying that each existing share of Rs 5 will be divided into 5 shares of Rs 1. In addition to the stock split, the board also announced the issue of 1 bonus share for every equity shareholder.
To illustrate this,
Bonus Issue | No of shares held before bonus. | Share price before Bonus issue | Value of Investment | Several shares held after Bonus. | Share price after Bonus issue | Value of Investment |
1:1 | 1 | 14500 | 14500 | 2 | 7250 | 14500 |
What is Stock Split
Stock split is an action which neither adds nor dilutes the ownership of existing shareholders and there is no impact on the market capitalization of the company as well, it just adds on more shares by reducing the value of existing shares. The major benefit of split shares is that it enhances the liquidity of existing shares as it reduces the price of shares and makes them affordable for small retail investors which will make buying and selling of these shares easier as well as increase the shareholder base of the company.
We will illustrate this with an example:
Split Ratio | Old FV | No of shares you own before split | Share Price before split | Investment Value before split | New FV | No of shares you own after the split | Share Price after the split | Investment value after the split |
1:5 | 10 | 1 | 14500 | 14500 | 2 | 5 | 2900 | 14500 |
What will be the Impact of the decision
Since the news broke out, the stock of Bajaj Finserv has surged up to 16 percent in the last three trading sessions whereas in July the stock surpassed the market by 33 percent in comparison to 7 percent surge in the S&P BSE Sensex. Post the stock split the authorized shares of the company will reach 1 Billion equity shares with a face value of Rs 1 and after the issue of bonus shares the authorized capital shares of the company will jump to 2 Billion equity shares with the same face value of Rs 1. Bajaj Finserv is the holding company under the Bajaj group and among India’s most sought-after NBFCs in the Indian market with over 50 million customers across the country.
Why did Bajaj Finserv take this decision?
In response to recent announcements, the company's management said that as and when the share price rises, it will be harder for small investors to own the shares of Bajaj Finserv, so to promote inclusivity and reward existing shareholders, the company has approved the above actions. Over the years, and its subsidiaries have grown significantly in terms of business and performance, and the highest share price among our competitors with the smallest capital bases is reflected in the share price of the company, which reached Rs 12,200 in October 2021.
The management further added that to incorporate the above changes the company will have to add a clause by amending the memorandum of association and carry out shareholder voting by way of postal ballot on the decisions announced. He also said that the company intends to complete the whole process by September 2022.
 - Shopify)