IRCTC, Indian Railways' tourism and catering subsidiary, has proposed a 1:5 stock split to "help boost liquidity in the capital market, broaden shareholder base, and make shares affordable to small investors." One IRCTC share with a face value of ten dollars will be divided into five shares with a face value of two dollars each.
IRCTC's stock increased by 6% to a 52-week high of Rs 2,727. On the BSE, it was last trading at Rs 2,693, up 5%. The stock split must be approved by the ministry of railways and the Indian government.
What is Stock-Split?
A stock split occurs when a company's board of directors releases additional shares of stock to existing owners without diluting their stakes' value. A stock split increases the number of outstanding shares while lowering the value of each share individually. While the number of outstanding shares fluctuates, the company's total worth and the value of each shareholder's stake stay constant.
"The board of IRCTC today recommended the proposal for sub-division or split of company's one equity share of face value of Rs10 each into five equity shares of face value of Rs 2 each, IRCTC said in a regulatory filing to the stock exchanges."
While the number of authorised shares remains same, the total number of shares issued will increase from 125,00,00,000 to 25,00,00,000. The decision, according to the IRCTC, will assist increase stock market liquidity, make shares more cheap to small investors, and broaden the company's shareholder base.
Following shareholder approval, the company plans to complete the process in three months.
The firm released its first-quarter results today. It made a net profit of Rs 82 crore in the June quarter, compared to a loss of Rs 24 crore the previous quarter. Its operating revenue increased by 85.4 percent to Rs 243 crore.
IRCTC entered the capital market in October 2019, and its first public offering (IPO) was a big success with individual investors. The multi-bagger stock was issued at a price of 320 per share, and investors were handsomely rewarded. This railway corporation is owned by the government, which owns 67.40 percent of it.