Stock splits gather steam

In most cases, prices move up after split

With the stockmarket booming, promoters are falling over themselves to boost the liquidity of their stocks through stock splits.

Ashok Leyland, Jindal Stainless, Premier Instruments and Unichem Laboratories proposed stock splits in February.

Nine companies, including these four, have so far this year proposed to split their Rs 10 paid-up equity shares to shares of lower denominations.

Ashok Leyland proposes to split its Rs 10 paid-up equity share into 10 paid-up shares of Re 1. Jindal Stainless has decided to split its Rs 10 paid-up equity share into five shares of Rs 2 each.

Unichem Laboratories wants to split its Rs 10 paid-up equity share into two shares of Rs 5 each, while Premier Instruments is planning to split its Rs 10 paid-up share to 10 shares of Re 1.

Bhansali Engineering Polymers, Emami, Hindustan Sanitaryware, Sundram Fasteners and Suven Life Science are the other companies that have split their stocks in the last two months.

A stock split reduces the value of a share to the extent of the split, making even high-priced stocks accessible to retail investors.

During the bull run of 1999-2000, promoters of infotech companies were the first to opt for stock splits. This time round, it is the turn of high price and low liquidity companies.

Of the five companies that have gone in for stock splits in the last two months, the prices of three have appreciated by 11-22 per cent each after the splits while those of two have declined more than 15 per cent.

Emami's market price jumped 22 per cent from Rs 144 (adjusted to the split) to Rs 175.80 on February 27 after it split its Rs 10 paid-up equity shares to five shares of Rs 2 each.

Bhansali Engineering Polymers' stock price increased 13 per cent to Rs 19 from Rs 16.88, while Hindustan Sanitaryware's scrip gained 11 per cent at Rs 113.30 (Rs 101.92) after they split their Rs 10 paid-up equity shares to Re 1 and Rs 5 paid-up shares, respectively.

However, the stock price of Suven Life Science declined 34 per cent from Rs 120.31 (adjusted to Rs 2 paid-up) to Rs 80 and Sundram Fasteners from Rs 112.15 (adjusted to Re 1) to Rs 92.90 on February 27.

The gainers

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• Emami's scrip jumped 22% from Rs 144 to Rs 175.80
• Bhansali Engineering Polymers' stock price increased 13% to Rs 19 from Rs 16.88
• Hindustan Sanitaryware's scrip gained 11% at Rs 113.30 from Rs 101.92

The losers

• The stock price of Suven Life Science declined 34% from Rs 120.31 to Rs 80
• Sundram Fasteners's scrip down from Rs 112.15 to Rs 92.90