Central Depository Services Limited (CDSL) is a market infrastructure institution (MII), it provides holding of securities in the dematerialized form and an enabler for securities transactions.
CDSL mentioned about 1:1 bonus shares and record date is Aug 24 2024.
CDSL stock climbed up 20% on 28 jun 2024 the reason is CDSL announcement of bonus issue news. The stock gained 20% in a single day, this stock is listed in NSE ,not listed in BSE. This company will provide services to the investors it includes retail investors, institutional investors and Mutual Fund etc. This Company will be providing securities including equity shares, Bonds of public (listed and unlisted) and private companies, Mutual Fund.
This is the first time company is considering to issue bonus shares to shareholders, the company said in a communication to bourses.
“A meeting of the Board of Directors of Central Depository Services (India) Limited (CDSL/Company) is scheduled to be held on Tuesday, July 02, 2024, inter alia, to consider and approve the proposal for issuance of Bonus Shares, if any, subject to the approval of the shareholders of the company,” it said in a filing.
In this article CDSL announcement of bonus issue : we will go through factors of CDSL company and also details about company meeting.
CDSL announcement of bonus issue:
Fundamentals
The CDSL Company thinking to issue 10,45,00,000 equity shares with a face value of Rs 10 each as bonus share.
The bonus shares will be issued within two months from the date of board approval, that is on before September 1/2024.
Market Cap of CDSL is 25.27KCr
P/E Ratio is 60.32
Current Price of the stock is 2421 Rs
52 weeks High 2538.65 Rs
52 weeks Low 1107.35 Rs
Company’s Net Profit increased 107cr to 127cr from last quarter
Sales will be increasing from year to year.
FIIS also increased from 15.25% to 18.16% in last December 2023.
What is meant by Bonus Share?
Bonus issue of shares means company allocating the additional shares to the investors who are holding that particular stock. Companies issuing bonus shares to make them stock more attracted to the retail investors. Companies issuing bonus shares to strengthening EPS, augment capital it also increases companies outstanding shares but not the market capitalization.
Advantages of bonus issue of shares.
If the company will be issuing bonus shares to the investors due to because of many reasons there are some reasons mentioned below,
– Provide additional shares to the investors which can be increase their investments in the company.
– This will be helpful for the Long-term investors to create wealth.
– They instill in investors a greater sense of faith in the company.
– Issue of bonus shares will increase the number of shares circulation, thus increase the liquidity.
– For investors issuing of bonus shares are generally not taxable until it will be sold.
Implications of bonus issue of shares
– The stock dividend doesn’t give create any extra wealth to the investors because share price drops by a proportionate amount to keep market capital of the company same as before.
– Not all investors will be interested in receiving the shares as a dividend, some may want the liquidity. when investors sell their bonus shares for generating liquidity, their stake in the company is reduced.
Benefits of issuing bonus shares in the company’s point of view
– Bonus issuing of shares is a positive sign to the market that companies believe in long-term growth.
– Sometimes company will not be in a position to pay any cash, so bonus issue is to satisfy the desire of the shareholders.
– Because of this small investor are also showing their interest in investing, so not only for the long-term investor’s bonus issue of shares helpful for the short-term investors.
– The increase in the issued share capital increases the perception of company size.
Drawbacks of issuing bonus shares in the company point of view
– Continuous issuing of bonus shares can accumulate costs of the company overtime.
– There in no cashflow issuing bonus shares doesn’t bring immediate funds.
Conclusion
Since this is the first time company CDSL announcement of bonus issue, they may take some time to decide on the numbers. While issuing of bonus shares will be having its advantages and disadvantages to the company and also for investors.
So Kindly do not invest based on News. Kindly check fundamentals and Technical’s of company and future growth, before investing.We cannot suggest this company as a Buy or Sell Recommendation this is only for learning process. You Can contact your Financial Advisor for more details.
FAQ
1)What is the difference between bonus and split?
Bonus shares mean issue of shares to its existing shareholders without consideration of number of shares held by them.it will be increasing the ability of number of shares held by the investors. In bonus issue, the stock price will be adjusted according to the number of shares issued. Example company provide bonus issue in 4:1 ratio here the
Bonus ratio is 4:1
Stock price before bonus issue:100
Total share count before bonus issue:100 shares
After bonus issue Share count:400 shares
Stock price after bonus issue: (100*100)/400=Rs 25
In bonus issue, the stock price falls in the same proportion as the bonus issue. Had the bonus issue been in 1:1 ratio, the stock price would be Rs 50.
split means company increases number of its outstanding shares to boost the stock liquidity. Split ratio like 2:1,3:1 etc.,
Both methods are ways a company can give rewards to the shareholders. In both of these shareholders don’t have to pay extra. In stock split existing stocks get split.it doesn’t effect on the investment.
2)Meaning of 1:5 bonus shares?
The meaning of this is ,shareholder will get 1 extra shares for 5 shares.so if an investor is having 100 shares in this time bonus will become 120 shares (100/5=20) (100+20=120).
3)Does issuing of bonus shares will effect on the company’s share price?
Bonus issue increases a company’s outstanding shares not the market capitalization. Companies issuing bonus shares to strengthening EPS, augment capital it also increases companies outstanding shares.