APL Apollo Tubes has announced a 1:1 bonus issue. Here is a quick round-up of what it means.
APL Apollo’s bonus offer
On 14 September '21, APL Apollo shares were trading at ₹1880. After the 1:1 bonus issue, the per share value will be adjusted accordingly. As an investor, it is important to keep in mind that though the number of outstanding shares will increase, the company's market value will remain the same. However, this increases the liquidity of shares and also catches investor interest citing low share price.
The ex-date for this issue is 16th September. So investors should buy the shares of APL Apollo latest on 15 September '21 to be able to benefit from the bonus issue.
Financial performance
In the June quarter, the company reported 129% year-on-year growth in revenue to ₹2,534 crore. In the same period, the company's net profit also increased by 672% to ₹168 crore.
What is a bonus issue and how does it work?
A bonus issue is a corporate action in which the company’s existing shareholders get additional free shares. 1:1 bonus issue means that the shareholder will get one free share for each one share held by him. For example, if someone is holding 100 shares of the company he will get 100 shares more.
This increase in the number of shares doesn’t affect the value of the company. The stock price falls in the same proportion as the bonus issue. In this scenario, the share price will be halved. For instance, if the share price before the bonus issue was ₹200, then it will fall to ₹100 after the issuing of the bonus share.
However, this means that there will be no impact on an investor’s investment as his shares will double. Instead of 100 shares, the investor will now have 200 shares but the share price will be halved as mentioned earlier.