45 companies splitting stock and FY17 has just begun

The Financial year 2017 has just crossed a quarter and 45 companies have already announced the stock-split for the year. Stock splits generally happen in a bull market as many promoters also want to keep hold of the wealth created by the secondary market. Giving out bonuses and splits is just an additional way of creating wealth in the hands of the shareholders.

What is a Stock Split?

All the Public-traded companies have a fixed number of shares that are held or traded in the share market. The stock split increases the number of those shares in the market. The price of each share is adjusted so that the market capitalization of the company remains the same and dilution doesn’t occur.

Why the Split?

The split is usually done by the company whose share price has increased to a level that is either too high or is beyond the levels of the companies in the same sector. The main motive of the split is to make the shares more affordable to small investors, keeping the underlying value of the company unchanged.

The Investment Strategy:

The split makes the stock affordable to even the small investors hence they rush to buy the stock, boosting the demand and driving up the price. Hence, it is often seen that the stock prices rise almost right after they have gone down due to the splits. Also, the split indicates that the price of the stock have been rising drastically and will continue to do so in the future as well, pushing the demand and price in turn.

But one should not ignore the fundamentals of the company in the process of blindly following the buy pattern. They must keep an eye on the proportionate growth in the bottom line of the company before investing their hard-earned money in such stocks.

Stock-Splits this financial year:

• Karur Vysya Bank: The Bank, yesterday, has sought shareholder’s approval for the stock split of five for one. This means that each share of the Bank will be split in to five. This split will bring the Karur Vysya Bank share price down which is currently at the face value of Rs. 10. Though the shareholder’s are yet to nod over the proposal, the stock has started gaining little by little over NSE.
• KNR Constructions: On 26^th of September, KNR Constructions share price traded on a new 52-weeks high after the company declared that the Board meeting will be held on 30^th of the month for considering the stock-split in the ratio of 1:5. This means that each share of Rs. 10 will be split in to the five shares of Rs. 2 each.
• 8K Miles: 8K Miles share price went up by 4% on 27^th on the company announced that it has fixed 13^th October 2016 as the date for ascertaining the eligibility of shareholders entitled for the stock split and bonus issue. The announcement was made on 26^th September after the market hours. On 24^thAugust, the company’s board approved the stock split in the ratio of 1:2 with one bonus share on every three shares held.
• Trent: On September 12^th, Trent split its one share of face value Rs. 10 in to ten shares of face value of Re. 1. The stock had surged around 10% on the day of the split. The split was approved on June 28^th 2016.
• V Guard: Right ahead of its stock split, V Guard share price hit a record high. On 31^st August 2016, the company divided its one equity share of Rs 10 in to ten shares of re. 1 each.
• Maruti Suzuki: Maruti share price has seen a jump of nearly fivefold in past four years. The company is considering the stock split requested by the shareholders as the stock has become inaccessible to many because of the price hike. In past three years, Maruti has appreciated to a magnificent 302%, surpassing both the Nifty and the Sensex.
• Bajaj Finance: On 26^th July, the board of Bajaj Finance approved the stock split of one equity share of face value of Rs. 10 in to the five shares of face value Rs. 2 each. The company also declared a bonus of one share for every share held of face value Rs. 2.  Bajaj Finance share price zoomed over 12% on the trade same day. The company completed its split on 12^th September.
• JMT Auto: JMT Auto share price gained after the company announced 22^nd September as the date for the split. The company split its share in two for one ratio.

Other than these big names, KPR Mills announced its stock split and went trading at a new high. Capri Global share price rallied 16% on the announcement of the split. And these are just a few names from the long list of 45 companies that have planned of indulging into the stock split this financial year.