The bull is back in the market and all is well with the world. Well almost, for investors at least. Investors in the Indian equity market have not just benefited from the appreciating scrips, they have also ended up with more share of the stocks they are holding. India Inc managements seem to be on a bonus issue spree.
Consider this: the total number of companies that have issued bonus shares in 2009-10 (up to March 23, 2010) is 72. This is 60% more than 45 companies which declared bonuses during the entire 2008-09. Of the 72, only two major corporate houses ? Reliance Industries (1:1) and Indian Oil (1:1) ? issued bonuses in 2008-09.
The financial year started off on a weak note but growth has since gathered momentum, thus giving India Inc the confidence to be able to service a larger equity base through dividends, say experts. While the share price of a stock always gets adjusted when bonus shares are issued (falling by half, if the ratio is 1:1), investors stand to gain if the scrap moves up significantly over time.
The bonus ratios have also been high this fiscal. For example, Empower Industries has declared 23 bonus shares for every two shares held while Chromatic India has issued five bonus shares for every two shares held.
Sectorwise, IT, construction, NBFC, pharmaceuticals, textiles and trading have declared the maximum number of bonuses during 2009-10. Among the IT companies, TCS declared 1:1 bonus in April 2009. The net worth of the company increased 22.4% to Rs 13,346 crore during 2008-09 while its net profit increased 4.1%.
A total of 32 companies have issued 1:1 bonus issues during 2009-10 while 8 have issued 1:2 bonus during the same period. Empower Industries has declared the highest number of bonus shares (23:2), followed by Munoth Capital (7:2).
In 2008-09, 19 companies issued 1:1 bonus shares while 8 declared 1:2 issues. Last fiscal, Westlife Develop declared the highest number of bonus shares (79:1), followed by Megh Mayur Infra (20:1).