Bajaj Finserv surges 10% after board approves 1:1 bonus, 1:5 stock split

In the past three trading sessions, the stock has gained 16 per cent after the company announced their plan for stock split and bonus issue.

Shares of Bajaj Finserv surged 10 per cent to Rs 14,579.95 on the BSE in Thursday’s intra-day trade after the company’s board approved 1:1 bonus issue and 1:5 stock split.

On July 28, 2022, the board approved sub-division of each existing equity share of face value of Rs 5 into five equity shares of face value of Rs 1 fully paid- up. The board also approved issue of one bonus equity shares of face value of Rs 1 for every 1 equity share of Rs 1.

In the past three trading sessions, the stock gained 16 per cent after the company announced their plan for stock split or bonus issue. So far in July, the stock has outperformed the market by 33 per cent, as compared to 7 per cent rise in the S&P BSE Sensex.

However, over the last three months, the stock has underperformed the market by falling 3 per cent, as against 1 per cent decline in the benchmark index.

Highlighting the rationale behind the split and issue of bonus shares, the management said, "Our company and 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 peak of Rs 19,325 in October 2021. Since then, the price has hovered around Rs 12,200."

Currently, retail or individual shareholders comprise 98 per cent of the total number of shareholders, which hold around 17.52 per cent of paid-up value of shares. Amongst its peers, the share price of the company is one of the highest despite a small capital base.

Meanwhile, a stock split is a corporate action, where a company splits its shares into multiple new ones. Split shares neither add any new value, nor dilute the ownership stake of the shareholders. However, what they do is increase the number of shares of the company.

The main benefit of a stock split is that the shares of a company generally see increased liquidity. Since shares have now become more accessible to retail investors, more people would show increased demand for it, which can increase liquidity in the counter. Therefore, buying and selling of shares will be easier after a stock split.

Bajaj Finserv is primarily engaged in the business of promoting financial services such as finance, insurance, broking, investments etc. They also distribute services via digital platforms through their investments in subsidiaries and joint ventures. Bajaj Finance is a subsidiary of Bajaj Finserv.