Bonus issue floats fail to sizzle scrips

Share price of 37 firms decline 10.6%.

Shareholders always welcome bonus issues as they come free of cost and enhance investor wealth. Such proposals, however, do not influence stock prices if announced in a falling market.

Between April 1 and June 20, the share price of 37 companies, which announced bonus issues, declined 10.6 per cent after the announcement was made till date.

The aggregate market value of these stocks declined by 30,705 crore with Tata Consultancy Services (market cap down by Rs 12,802 crore), Infosys Technologies (Rs 8,644 crore), Satyam Computer (Rs 4,660 crore) and Lupin (Rs 1,033 crore) took major jolt.

Despite liberal bonus proposals, market values of 30 such stocks are down between 10 per cent and 70 per cent from the date of the announcement.

Four companies that announced their bonus proposals after June 10 have bucked the trend. They are trading at premium over their market prices on the date of announcement.

While the Sensex has declined by around 30 per cent from its peak level of 12,612 on May 10, market price of as many as nine bonus proposals declined by over 33 per cent between the date of bonus announcement and on Thursday.

The market price of six others declined between 15 per cent and 20 per cent, while that of three companies has declined between 10 per cent and 15 per cent.

Alps Industries which announced its bonus proposals in the ratio of 1:1 on May 2 has declined by 65.06 per cent from close of Rs 274.45 on May 2 to Rs 95.90 on Thursday.

Anuh Pharma is down by 39.68 per cent, Banswara Syntex by 37.42 per cent, Hind Dorr Oliver by 36.02 per cent, KSL & Ind by 35.37 per cent, Investment & Precision Casting by 30.71 per cent, KS Oil by 24.73 per cent and Apollo Sindhoori Capital Investment by 26.76% after the announcement of bonus shares.

Among frontline companies, Cadila Healthcare registered 20.02 per cent decline in its price. The share of Lupin is down by 20.10 per cent, Satyam Computer 15.28 per cent, Gujarat NRE Coke 13.89 per cent, EIH 12.37 per cent, TCS 11.97 per cent, Infosys Technologies 8.63 per cent and Dr Reddy's Labs 6.86 per cent after their bonus announcements.

The exceptions are those who announced their bonus proposals after June 10.

The market price of Tricom India rose by 39.61 per cent, Precision Electronics by 21.48 per cent, Bhagyanagar Metal 13.51 per cent, Opto Circuits up 16.43 per cent, Jaybharat Textiles 4.76 per cent, Unitech 11.94 cent and Larsen & Toubro by 10.46 per cent.