Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Stocks

BHEL announces a 1:1 bonus

BHEL has now announced a 1:1 bonus – that means one for every share you own. The record date is June 1, 2007.

Post June 1, the share price will drop by half. That means you will not benefit in any real way from the bonus. But one thing that may happen is that there may be lots of buying for saving tax. This may drive up the share price temporarily.

  • Anonymous says:

    >Hi Deepak,
    when the shares of BHEL fall by half in its current price after the bonus issue,is it still worth buying them?.

    Thanks
    Durga

  • Deepak Shenoy says:

    >Well, you will get one share for every share that you own. So if you buy one share today you will get two tomorrow.

    So if the price goes down by half your total worth of the shares you own is the same.

  • Ritesh Kamath says:

    >Hi Deepak,

    I have noticed that before a share split, when the news comes , a share price is driven up by a bit ..but after it splits,it falls to [(1/2 value) – delta ] . Delta being the increase caused in the recent days due to speculation. Isnt it wise to buy the shares after a split ? wont it be safer then ?

    I am saying this cos i have lost quite a lot of money in Mercator lines & other companies during a share split ..

    Regards,
    Ritesh Kamath

  • Dattaswarup says:

    >HI Deepak,
    I have a query.Can you help me.What is the percentage of tax on interest earned in FD if one falls in highest tax bracket. Is it flat 10% which bank anyways deducts as TDS or do we have to pay later on to make it 30% in total?

    Please comment.
    Email:dattaswarup@gmail.com

  • Deepak Shenoy says:

    >Ritesh: Interesting. It would be wise to check other stock split announcements in the past and see if that is the case. If it is so, you might have a good point. I’ve personally never seen it (owned Hero Honda which split but gave rich yields after that)

  • Deepak Shenoy says:

    >duttaswarup: You have to pay the remaining tax yourself. The bank only deducts part of the tax – 10%.

  • Pramesh says:

    >Hi Deepak,

    I am a relative newcomer in the stock market and I would like to let you know that I have found your blogs both interesting and enlightening. Thanx

    Regarding BHEL, I was trying to read the notice of the EGM fo 30 April 2007. The first item is to increase the Authorised Share Capital from the present Rs 325 crores to Rs 2000 crores – a factor of 6+. The Bonus shares are 1:1 which requires only doubling of the Authorised share capital. So what gives? Is this a standard practice or is there some other dilution being planned that we should know about?

    Regards

    Pramesh

  • Deepak Shenoy says:

    >Pramesh: Authorised capital is not the total number of outstanding shares (that’s the “paid up capital”). So increasing authorised capital means increasing the number of shares that a company can issue. So perhaps at a later point they can give further bonus issues without needing an EGM or such.