BEML Share Price Declines As Stock Trades Ex-Split: A Detailed Analysis
The shares of BEML Ltd. have fallen 50% on Monday as the stock begins trading adjusted for its stock split announced earlier. The PSU had earlier announced a 1:2 stock split, which means that one share with a face value of Rs 10, will be split into two shares of Rs 5 each.
Reasons Behind The Stock Split
BEML said the stock split is being undertaken to comply with government guidelines on capital restructuring, encourage wider participation of small investors, and enhance liquidity in the market. A stock split is a corporate action where a company increases the number of outstanding shares by reducing the face value per share. This typically enhances liquidity as the stock price adjusts accordingly. While the number of shares increases, the total investment value remains unchanged.
Impact On Market Capitalization
The stock split will not affect the company’s market capitalisation but will increase the number of shares twofold. This move is generally aimed at enhancing market liquidity. To be eligible for a stock split, investors must hold shares as of the record date announced by the company. The record date determines who will receive additional shares post-split, based on the split ratio. With India following the T+1 settlement cycle, investors need to purchase the stock at least one trading day before the record date to be eligible.
Current Market Trends
The scrip fell as much as 1.63% to Rs 2,164 apiece on Monday. It pared losses to trade 0.29% lower at Rs 2,193.60 apiece, as of 9:46 a.m. This compares to a 0.02% advance in the NSE Nifty 50 Index. It has risen 10.03% in the last 12 months and risen 6.39% year-to-date. Total traded volume so far in the day stood at 0.34 times its 30-day average. The relative strength index was at 52.
Analyst Recommendations
Out of four analysts tracking the company, three maintain a ‘buy‘ rating and one recommends a ‘hold,’ according to Bloomberg data. The average 12-month consensus price target of Rs 4,761 implies an upside of 7.7%.
Conclusion
In conclusion, the stock split of BEML Ltd. is a strategic move to enhance market liquidity and encourage wider participation of small investors. While the stock price has declined 50% as it begins trading adjusted for the stock split, it is essential for investors to understand the reasons behind the move and its impact on the company’s market capitalization. As always, it is crucial to do your own research and consult with a financial advisor before making any investment decisions.
