BEML, the defence PSU multibagger, tanked 50% today; what triggered the crash

Against a previous close of Rs 4,399.80 apiece on NSE, BEML Ltd shares opened at Rs 1,042 apiece on Monday, down just over 50 per cent, surprising a few investors. The fall in the shares of defence PSU firm was due to the stock getting split from face value of Rs 10 each into shares with face value of Rs 2 each.

In a stock split, already owned shares are split into shares with smaller face values in a bid to increase liquidity on the counter. It is possible that trading apps of certain brokerages might be showing the unadjusted price for BEML and, thus, suggesting an 50 per cent fall on the counter. Adjusting for the stock split, BEML shares were trading at Rs 2,187.95 apiece, down 0.55 per cent.

BEML said the stock split has been executed in line with DIPAM’s capital restructuring guidelines, aimed at widening retail investor participation and improving liquidity in the counter.

A stock split divides existing shares into smaller units at a reduced face value, without altering the company’s overall capital. In BEML’s case, the 1:2 split has reduced the face value from Rs 10 to Rs 5 per share, effectively doubling the number of shares held by investors. While dividend per share will adjust accordingly, total equity capital and reserves remain unchanged. Price feeds on some trading platforms may not yet have reflected the adjustment, making the stock appear to have fallen sharply post the corporate action.

BEML has presence across Defence & Aerospace, Mining & Construction, and Rail & Metro segments. The stock has seen a sustained re-rating, delivering an 18-year breakout in 2023. It has rallied 336 per cent in the past two years, 458 per cent over three years, and 1,615 per cent over five years. In the last three months alone, it has gained 122 per cent.

Before the split, the company’s authorised share capital of Rs 100,00,00,000 was divided into 10,00,00,000 equity shares of Rs 10 each, with issued, subscribed and paid-up capital at Rs 41,64,45,000 (4,16,44,500 equity shares). Post the split, the authorised capital remains unchanged but is now represented by 20,00,00,000 equity shares of Rs 5 each. The paid-up capital also remains Rs 41,64,45,000, with the share count increasing to 8,32,89,000 equity shares of Rs 5 each.