On 28th July 2022, Bajaj Finserv announced a 5-for-1 stock split and 1:1 bonus issue.
Important Dates:
Ex-date: 13th Sept
Record date: 14th Sept
A Stock Split is a corporate action wherein a company increases the number of existing shares by splitting them and reducing their face value. In the case of Bajaj Finserv, every share of face value Rs. 5 is split into 5 shares of face value Re. 1. So if John has 100 shares, he will have 500 shares post-split
A Bonus Issue is a corporate action wherein free additional shares are offered to existing shareholders, distributed in proportion to their holdings. In the 1:1 Bajaj Finserv bonus issue, eligible shareholders receive 1 bonus share for every share held. So if John has 100 shares, he will receive 100 bonus shares.
Overall impact:
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To be eligible to receive shares as part of the 2 corporate actions, you must hold the shares in your Demat account as on the Record date. In other words, the shares must be bought before the Ex-date settled in your account by the Record date.
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In this case, shares must be purchased by 12th Sept (as the shares start trading ex/without benefits from 13th Sept) for it to be settled in your Demat account by the Record date i.e., 14th Sept.
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The market price of the share will come down proportionate to the split and bonus issue. This is because there is no change in the market capitalisation of the company.
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The impact of the stock split is determined first. Based on this, bonus shares are issued. If you hold 10 shares of Bajaj Finserv in your Demat account on 14th Sept (record date):
First, 10 shares are split into 5 i.e., 50 shares (10 x 5)
Next, Bonus shares are issued against the 50 shares of new face value i.e., 100 shares (50 x 2) -
After the Record date, since the face value of the share decreases, so does the market price. This increases liquidity and allows smaller investors to participate.
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The ISIN of shares that have undergone a stock split must be changed, Hence, you can view your updated holdings only after this.
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The new average rate will reflect in your account immediately but it will take time for the quantity of the split shares (up to 2 days) and bonus shares (generally 2 weeks) to be credited to your Demat account. Till then, your portfolio may show an incorrect loss due to this mismatch. As soon as the Depository credits these shares to your Demat account, the holdings value will be automatically re-adjusted. This generally takes
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Similarly, your P&L for the Period Statement will take some time to be updated.
**How are F&O contracts adjusted for a stock split?**
To adjust F&O contracts, an adjustment factor is calculated and contracts are modified accordingly. Since Bajaj Finserv underwent a 5-for-1 stock split and a 1:1 bonus issue, the adjustment factor is 10 (5 x 2); as seen in the example above, a person with 10 shares will hold 100 shares post-benefits.
Hence, the initial lot size of 50 for F&O contracts is revised to 500.