Bonus Shares and Stock Splits: Four Stocks to Watch Out for in March 2024

The stock market is always buzzing with news and events that can affect the prices and returns of the investors. One such event is the announcement of bonus shares and stock splits by the companies. Bonus shares and stock splits are two ways of rewarding the existing shareholders of the company by increasing their number of shares without affecting the share capital. In this article, we will look at four stocks that are likely to issue bonus shares and stock splits in March 2024, and what it means for the investors.

What are bonus shares and stock splits?

Bonus shares are additional shares that are issued to the existing shareholders of the company for free. The bonus shares are issued in a fixed ratio to the existing holdings of the shareholders. For example, if a company announces a bonus issue of 1:1, it means that for every one share held by the shareholder, they will get one more share for free. The bonus shares increase the number of shares outstanding of the company, but do not change the share capital or the market value of the company. The bonus shares are usually issued from the accumulated reserves or profits of the company.

Stock splits are a way of reducing the face value and the market price of the shares of the company by increasing the number of shares outstanding. The stock splits are also done in a fixed ratio to the existing holdings of the shareholders. For example, if a company announces a stock split of 2:1, it means that for every one share held by the shareholder, they will get two shares of half the face value and half the market price. The stock splits do not affect the share capital or the market value of the company, but make the shares more affordable and liquid for the investors.

Why do companies issue bonus shares and stock splits?

The main reasons why companies issue bonus shares and stock splits are:

• To reward the loyal and long-term shareholders of the company by increasing their shareholding and dividend income.
• To increase the liquidity and trading volume of the shares in the market by making them more affordable and accessible for the investors.
• To signal the confidence and optimism of the management in the future growth and profitability of the company.
• To improve the financial ratios and indicators of the company, such as earnings per share, return on equity, and price to earnings ratio.

Which are the four stocks to watch out for in March 2024?

According to various sources and reports, the following four stocks are expected to announce bonus shares and stock splits in March 2024:

• Paisalo Digital Ltd: Paisalo Digital Ltd is a non-banking financial company that provides loans and financial services to the rural and semi-urban segments of India. The company has announced a bonus issue of 1:1, which means that the shareholders will get one bonus share for every one share held by them. The record date for the bonus issue is March 20, 2024, and the ex-date is March 20, 2024. The current market price of the share is Rs. 142.95, and the face value is Rs. 10. The bonus issue will increase the number of shares outstanding from 2.64 crore to 5.28 crore, and reduce the earnings per share from Rs. 13.64 to Rs. 6.82.
• FIEM Industries Ltd: FIEM Industries Ltd is a leading manufacturer and supplier of automotive lighting, signaling, and rear view mirrors for various vehicles. The company has announced a bonus issue of 1:1, which means that the shareholders will get one bonus share for every one share held by them. The record date for the bonus issue is February 28, 2024, and the ex-date is February 28, 2024. The current market price of the share is Rs. 2397.95, and the face value is Rs. 10. The bonus issue will increase the number of shares outstanding from 1.23 crore to 2.46 crore, and reduce the earnings per share from Rs. 97.51 to Rs. 48.76.
• DRC Systems India Ltd: DRC Systems India Ltd is a software development and IT services company that provides solutions for various domains, such as e-commerce, education, hospitality, and healthcare. The company has announced a bonus issue of 2:1, which means that the shareholders will get two bonus shares for every one share held by them. The record date for the bonus issue is February 27, 2024, and the ex-date is February 27, 2024. The current market price of the share is Rs. 64.36, and the face value is Rs. 10. The bonus issue will increase the number of shares outstanding from 1.5 crore to 4.5 crore, and reduce the earnings per share from Rs. 2.58 to Rs. 0.86.
• SG Mart Ltd: SG Mart Ltd is a retail company that operates a chain of supermarkets and hypermarkets in India. The company has announced a stock split of 1:1, which means that the face value and the market price of the share will be halved, and the number of shares outstanding will be doubled. The record date for the stock split is February 22, 2024, and the ex-date is February 22, 2024. The current market price of the share is Rs. 11258.35, and the face value is Rs. 10. The stock split will reduce the face value and the market price of the share to Rs. 5 and Rs. 5629.18, respectively, and increase the number of shares outstanding from 0.5 crore to 1 crore.

What should the investors do?

The investors who are holding the shares of these companies as on the record date will be eligible to receive the bonus shares and the stock split shares. The investors who are planning to buy the shares of these companies should do so before the ex-date, as the share price will adjust accordingly after the ex-date. The investors who are looking for long-term returns and dividend income can hold on to the shares, as the bonus shares and the stock split shares will increase their shareholding and dividend income. The investors who are looking for short-term gains can sell the shares after the ex-date, as the share price may rise due to the increased demand and liquidity of the shares.