6:11 bonus shares, 1:10 stock split: Multibagger SME IPO turns ₹1 lakh into ₹25.93 lakh in seven years | Stock Market News
Source: Live Mint
Bonus shares, stock split effect: Investing in stocks is like investing in a business. Hence, one should hold a stock as long as one can. This rule applies to both primary and secondary market investors. A long-term investor not just earns from stock price appreciation but from various other rewards that a listed entity declares from time to time. These rewards can be in the form of bonus shares, buyback of shares, stock split, interim, special, or final dividend, etc. Prima facie, these rewards may not look lucrative, but they help your money grow manifold in the long term. In other words, such rewards help an investor create wealth instead of just earning on one’s investments.
Lorenzini Apparels share price history
To understand how these rewards impact your investment, you need to look at the journey of Lorenzini Apparel shares. The BSE SME stock was listed in February 2018 after opening on 31 January 2018. The public issue was offered at a fixed price of ₹10 per share, and the lot size of the Lorenzini Apparels Ltd IPO was 10,000. The SME IPO was listed on the BSE SME platform at a tepid premium, as it opened on the BSE at ₹10.20 apiece and finished at ₹9.25 apiece on the share listing date.
However, after the positive debut in the Indian stock market, Lorenzini Apparel’s management delivered some extra rewards from the company’s capital reserves. The board of directors of the SME company declared 6:11 bonus shares and a 1:10 stock split in March 2024. The SME stock traded ex-bonus and ex-split on 28th March 2024 for the same.
Bonus shares, stock split effect
As mentioned above, if an allottee had remained invested in the SME stock despite tepid listing, one’s shareholding in the company would have surged to 1,00,000 (10,000 x 10) after a 1:10 stock split. After 6:11 bonus shares, one would have got an additional 909 company shares. So, the net shareholding of the allottee after availing the benefit of a 1:10 stock split and 6:11 bonus shares had been 1,00,909 [1,00,000 + {(10,000 /11) x 6}].
₹1 lakh turns to ₹25.93 lakh
Lorenzini Apparel’s IPO lot size was 10,000, and one share was offered at ₹10 apiece. The minimum investment of an allottee had been at least ₹1 lakh ( ₹10 x 10,000). After availing the benefit of a 1:10 stock split and 6:11 bonus shares, net shares held by an allottee without any further investment had been 1,00,909. Lorenzini Apparel’s share price ended at ₹25.70 on Friday, which means the absolute value of one ₹1 lakh had become ₹25,93,361.30 ( ₹25.70 X 1,00,909) OR ₹25.93 lakh. So, an allottee’s ₹1 lakh would have turned to ₹25.93 lakh in nearly seven years.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
