Adani Power share price jumps 19% post stock split; here's why

Adani Power Ltd share price climbed 19 per cent in Monday's trade, as the scrip turned ex-date for stock split. Adjusted for the corporate event, the Adani group stock climbed 18.82 per cent to hit a high of Rs 168.50 on BSE. On unadjusted basis, the stock opened at Rs 141.80 apiece, down 80 per cent over Friday's closing price of Rs 709.05, as Adani Power stock with face value of Rs 10 got split into five shares with face value of Rs 2 each.

The stock has already been in news after SEBI dismissed Hindenburg Research’s allegations against the Adani Group. With the stock split, Adani Power aims to encourage greater retail participation by making shares more affordable. This is after the stock surged 388 per cent from their February 2023 low, making it the best-performing Adani Group stock since the Hindenburg episode.

A stock split divides already-owned shares into smaller units of lower face value to improve liquidity. In Adani Power’s case, the 1:5 split means each share will be split into five shares, with the face value reduced from Rs 10 to Rs 2. Dividend entitlement will shrink proportionally, while share capital and reserves remain unchanged.

Post-split, Adani Power’s 385,69,38,941 paid-up shares of Rs 10 each will expand to 19,28,46,94,705 paid-up shares of Rs 2 each. Its authorised shares  will also be recast from 2480,00,00,000 shares of Rs 10 each to 12400,00,00,000 shares of Rs 2 each.

A stock split is different from a bonus issue. While a split only lowers the face value of existing shares, a bonus issue rewards shareholders with free additional shares drawn from accumulated earnings, without changing the face value. Importantly, dividends remain unaffected in a bonus issue.

Adani Power shares are now up for two straight days. The stock had jumped 12.36 per cent on Friday after SEBI has concluded that Hindenburg Research’s claims of fund routing via Adicorp, Milestone, and Rehvar to manipulate Adani’s listed companies were unsubstantiated. The regulator noted that while related-party transactions existed, they were properly disclosed and accounted for under existing regulations.

SEBI suggested that the transactions flagged in the Hindenburg allegations do not violate the Listing Agreement or SEBI (LODR) Regulations, as they do not qualify as “related party transactions.” The regulator also found no breach of Section 12A of the SEBI Act or SEBI (PFUTP) Regulations, as alleged in the show-cause notice (SCN).

“Once it is established that there is no violation of the above two main issues, it logically follows that there is no violation of any other related allegations concerning non-disclosure or approval of related-party transactions,” SEBI noted.

The stock is also in focus after Morgan Stanley last week initiated coverage on the stock.

"Adani Power is a good illustration of turnaround in India's corporate history, with resolution on most regulatory issues & multiple value-accretive acquisitions. APL will deliver strong earnings growth driven by timely completion of projects & more PPA wins medium term. Initiate at OW & Top Pick," Morgan Stanley said.