Dr Lal PathLabs shares: Why this stock is showing up to 50% in some trading apps today

Dr Lal PathLabs bonus shares: Healthcare Services player Dr Lal PathLabs might be showing up to 50 per cent fall in some trading apps today as all these the shares turned ex-bonus, adjusting to the pre-announced corporate action. Dr Lal PathLabs had announced to issue bonus shares for the eligible shareholders in 1:1 ratio, which is indicating a sharp downside in its stock price.

It means all the eligible shareholders of Dr Lal PathLabs will be allotted an additional share of the company for each share held by them as of the record date. However, the face value of each stock will remain unchanged at Rs 10 each. From today, the price will be adjusted for the shareholders, suggesting a sharp downfall.

Shares of Dr Lal PathLabs opened at Rs 1,390 on Friday, signaling a more than 50 per cent fall from its previous close at Rs 2,796.7 on Thursday. The total market capitalization of the company stood close to Rs 23,000 crore mark. The indicated fall was due to the issue of bonus equity shares in 1:1 ratio. The stock was seen at Rs 1,359.10 after opening trade, down 3 per cent.

A bonus issue rewards shareholders with free shares funded from accumulated earnings, without altering the face value. On some trading apps, because of non-adjusted price, the corporate action may appear as a sudden 50 per cent plunge, but investors have little reason to panic. The fall is only optical, as the number of shares simply doubles with the issue of fresh shares. There is no dilution of equity. Face value also remains the same.

Dr Lal PathLabs provides diagnostic tests and services globally. The company reported a healthy overall performance, driven by increased sample and patient volumes. Deeper penetration in existing markets and a favorable business mix contributed to revenue and profitability, said Geojit Investments.

It expects to achieve double-digit revenue growth, with plans to add new labs, expected to be supported by strong cash flow generation, driving long-term growth. However, given the current valuation levels, we are revising our stance to a 'hold'rating, with a target price of Rs 3,548 (Rs 1774 post bonus adjustment)," it added.