HDFC AMC share price plunges 50% as stock turns ex-bonus; key details  

Against a previous close of Rs 5,339.50 apiece on NSE, HDFC Asset Management Company Ltd (HDFC AMC) shares opened at Rs 2,682 apiece on Wednesday, down 49.74 per cent, surprising a few investors. The fall in the shares of the asset manager was due to the stock turning ex-bonus in the ratio of 1:1.

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 number of shares simply double with the issue of fresh shares. There is no dilution of equity. Face value also remains the same.

On adjusted basis, HDFC AMC shares were up 0.51 per cent at open.

A bonus issue increases the number of shares in circulation, reduces free reserves and lowers earnings per share (EPS). Consequently, the stock price adjusts downward. The total number of securities proposed to be issued by HDFC AMC stood at 21,40,03,751. The bonus shares would be issued out of the company’s Capital Redemption Reserve Account and Securities Premium Account as at September 30.

HDFC AMC’s authorised share capital (pre-bonus) stood at Rs 3,50,00,00,000, divided into 60,00,00,000 equity shares of Rs 5 each and 5,00,00,000 redeemable cumulative non-convertible preference shares of Rs 10 each.

Its issued, subscribed and paid-up capital comprised 21,40,03,751 equity shares of Rs 5 each, aggregating to Rs 107,00,18,755.

Post-bonus, the authorised capital remained unchanged. The issued, subscribed and paid-up capital rose to 42,80,07,502 equity shares of Rs 5 each, aggregating to Rs 214,00,37,510. The figures remain subject to change pursuant to the exercise of employee stock options, with the actual number of bonus shares dependent on fully paid-up equity shares as of the record date.

While bonus issues and stock splits may seem similar, their intent differs. A stock split divides existing shares into smaller units to enhance liquidity, thereby reducing the face value. For instance, in a 1:5 split, each share is split into five and dividend entitlement shrinks proportionately. In a bonus issue, however, dividend entitlement remains unchanged.