InvestorQ : Why did the stock of Bajaj Finserv rally so sharply on Tuesday 30th August 2022?
Anamika Sodhani made post

Why did the stock of Bajaj Finserv rally so sharply on Tuesday 30th August 2022?

Angel dcosta answered.
2 months ago

The stock of Bajaj Finserv surged by a full 5% on Tuesday to a price of Rs16,850 and this surge in the price came after the company announced that it had fixed September 14, 2022 as the Record Date for the split and the bonus. The record data will be the cut-off date for the purpose of determining the members or shareholders who are eligible for the split and bonus shares. Normally, shareholders intending to get bonus and split must buy it 2 working days prior to the record date so that their names appear as the demat holders in records.

The ratio of the split and the bonus has already been determined during the board meeting of Bajaj Finserv held on July 28th, 2022. The stock split would entail splitting the face value of each share from Rs5 to Rs1. In addition, once the split is completed, Bajaj Finserv will also offer 1:1 bonus i.e. 1 bonus share for every share held. In short a person holding 100 shares prior to the split and bonus will be holding 1000 shares post the split and bonus. The price of Bajaj Finserv will also get proportionately adjusted lower by approximately one-tenth.

The company had explained in detail the rationale behind the split and issue of bonus shares at the AGM. According to the top management of Bajaj Finserv, the company and its subsidiaries had grown significantly in terms of business and performance over the years. The stock price had touched a peak of Rs19,325 in October 2021. While this reflected a lot of wealth creation, it also made the stock out of bounds of most retail investors. The idea of the split and bonus was to bring the stock into a more popular trading range.

That was one of the reasons why the stock had been seeing narrow retail interest and that had led to the stock price falling from the Rs19,325 levels down to around the Rs12,500 levels. However, the stock price has bounced back sharply after the bonus and split announcement. Individual shareholders comprise 98% of the number of shareholders but just about 17.5% of holding value. That was largely because the high price levels had made the stock increasingly steep for a retail investors to buy and hold.

Bajaj Finserv is basically the holding company for the financial footprint of the Bajaj group and Bajaj Finance is also part of the Bajaj Finserv holdings. It is primarily engaged in financial services like insurance, broking, investments etc. Its 3 major business units are Bajaj Finance (the NBFC arm), Bajaj Life Insurance and Bajaj General Insurance. While Bajaj Finance is a market leader in the NBFC space, the group is also a very significant player in life and general insurance.