The power of a bonus issue: How Rs 1,000 becomes Rs 1.40 crore and generates multibagger returns of 13,88,285 per cent!

Rakesh Deshmukh
/ Categories: Mindshare, Knowledge, General
The power of a bonus issue: How Rs 1,000 becomes Rs 1.40 crore and generates multibagger returns of 13,88,285 per cent!

From just 2857 quantities purchased initially, the quantity grew to 38.44 times just through the bonus issue, reaching 1,09,833 shares.

bonus issues always excite investors because they provide additional shares at no cost, based on the ratio announced by the company and the holding as of the required date. When a company announces that the board will consider a bonus issue, investors often try to buy the company’s shares or accumulate them if they already own them, in order to receive the additional shares offered by the company as a bonus issue.

In this article, we will analyze a Large-Cap auto component manufacturing company that has distributed almost 9 times bonus shares to its investors. The company's shares are currently trading at around Rs 126 per share on the BSE. The last issue was announced in 2022, according to the latest available details, with a ratio of 1:2. This means that for every 2 shares investors held in their account, they would receive 1 additional share.

Also read Invested in the wrong stock type? Here are 6 types of stocks to consider for your portfolio!

Now, turning your attention to the calculation parts: How many times has the company announced a bonus issue and what were their ratios? Additionally, how does Rs 1000 become Rs 1.4 crore, allowing investors to earn a multibagger return of 13,88,285 per cent?

Investment Date

Stock Price (01-01-2000)

Qty Purchased

Investment Amount

01-Jan-00

0.35

2,857

1,000

Bonus Year

Ratio

Bonus Shares

Qty Post Bonus

2000

01:02

                                           1,429

                                                 4,286

2005

01:02

                                           2,143

                                                 6,428

2007

01:02

                                           3,214

                                                 9,642

2012

01:02

                                           4,821

                                               14,464

2013

01:02

                                           7,232

                                               21,695

2015

01:02

                                         10,848

                                               32,543

2017

01:02

                                         16,272

                                               48,815

2018

01:02

                                         24,407

                                               73,222

2022

01:02

                                         36,611

                                           1,09,833

 

As per the above table, an investor who bought the company’s shares in January 2000 when the shares were trading at Rs 0.35 per share would have acquired around 2857 shares at that time. Following the mentioned bonus issues, the investor would receive additional bonus shares during this timeframe, totaling around 1,06,976, and eventually reaching a total of 1,09,833 shares (including bonus shares).

The current market price of the shares is around Rs 126.4 per share. Based on this, the current value comes out to be Rs 1.38 crore (Rs 126.4 per share * 1,09,833 shares), yielding a return of 13,88,285 per cent during this timeframe. The quantity grew from 2857 to 1,09,833 shares, representing an initial investment of Rs 1000 which has now become Rs 1.38 crore, signifying a gain of 13,88,285 per cent. Furthermore, if the company had not announced any additional bonus during this period, the absolute return would have been around 36000 per cent during the same period.

Let me reveal the company’s name, it is Samvardhana Motherson International Ltd which is primarily engaged in the manufacturing and sale of components to automotive original equipment manufacturers. As per the Quarterly Results, the company’s revenue increased by 27 per cent in Q3 FY4 while PAT surged by 26 per cent during the same period.

Investors must keep this penny stock on their radar.

Disclaimer: The article is for informational purposes only and not investment advice.

Rate this article:
3.8

DSIJ MINDSHARE

Mkt Commentary6-Dec, 2024

Swing Trading8-Dec, 2024

Penny Stocks6-Dec, 2024

Multibaggers6-Dec, 2024

Multibaggers6-Dec, 2024

Knowledge

MF15-Nov, 2024

General15-Nov, 2024

MF14-Nov, 2024

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR