Small firms smitten by stock splits

Small is beautiful when it comes to the face value of stocks. After the big market cap companies, it's now the turn of small- and mid-cap outfits to go in for stock splits and increase the liquidity in a booming market.

In the first eight months of calendar year 2005, as many as 61 companies have split their shares, while 27 others have proposed to do so. In 2004, only 36 companies had opted for stock splits.

Promoters of small- and mid-cap firms are making a beeline to sub-divide their equity shares from the exiting paid-up values to lower denominations.

The objective is to infuse liquidity and attract wider investor participation. "Stock split increases the quantum of floating stocks. As the value goes down, more investors buy stocks. Historically, the prices always go up after a split," said an analyst.

Today, Garg Furnace and Sundaram Multi Pap informed the Bombay Stock Exchange (BSE) that their boards of directors would meet next week to take a decision on sub-division of equity shares.

The Rs 10 paid-up Garg Furnace is trading at Rs 38.15, while the Rs 10 paid-up Sundaram Multi Pap's market value is Rs 128.10. The boards of Dishman Pharma, Zenith Healthcare and Mobile Telecommunication will discuss the same issue next week.

The boards of Natural Stone Exports, Paras Petrofils and Kajaria Ceramics will meet this weekend to decide on splitting the Rs 10 face value of their shares into 10 shares of Re 1 each.

In August alone, the boards of as many as 23 companies proposed to hold meetings for splitting stocks. Among big market cap stocks,

Hindalco and ITC decided to split their exiting Rs 10 paid-up equity shares into Re 1 each.