Mid-caps Carnage

I am really appreciative of the DSIJ team for very appropriately taking up Cover Story “Underperforming Stocks: What Should You Do with them?” It has been very correctly brought out that holding the underperformers is a cascading risk which can wipe out the invested capital altogether. As indicated by the learned authors and very relevantly, investors find it a tough decision to sell a stock at a loss under the sentiment and belief of an eventual pick-up. 

One issue on which I would like to see coverage relates to the buyback and subsequent announcement of bonus issue by Infosys. The company undertook buyback in Dec 2017, which reduced the equity and has now announced a 1:1 bonus to celebrate 25 years of listing, which may not be value accretive and would reduce the EPS. The matter appears perplexing as the object of buyback and thereby improving earnings gets nullified by bloating equity through bonus shares. Can the attention of SEBI be invited to put time limits/ restriction on such acts in a span of even less than a year?

- Ajay Gupta 

Editor Responds: 

Thank you for your great feedback on our previous issue. As far as corporate actions go, we would be studying your observations on Infosys and shall cover the topic in one of our coming issues. Yes, investors can highlight pertinent issues to SEBI by sending them a query. You can surely do so in your capacity as an investor. Keep writing to us and hope you would also enjoy the current issue.