1:10 Stock Split, 1st Ever: Not IRFC Or RVNL But This Smallcap Railway Stock Below Rs 500 Splitting Soon

A railway company has announced plans to split its shares in the ratio of 1:10, for the first time. However, this railway company is neither IRFC nor RVNL which has witnessed extraordinary gains of 115-250% YTD. Instead, it is a smallcap railway stock trading below Rs 500, namely K&R Rail Engineering which will split soon. KR has a PE ratio of 70.53x and a return on equity of 10.78%.

And unlike its peers like large-caps IRFC and RVNL, K&R Rail shares have broadly been down in 2024 so far. YTD, K&R Rail is down by over 31% on BSE. However, in the long term, the stock emerged as a multi-bagger with gains of a whopping 3,141% on the exchange.

K&R Rail Engineering Share Price:

Last week, on Friday, K&R Rail's share price ended at Rs 491.60 apiece, marginally up with a market cap of Rs 1,040.77 crore. The stock is nearly half of its 52-week high of Rs 863.35 apiece, and close to its 52-week low of Rs 414 apiece.

The stock split was warranted since K&R Rail is trading with a higher PE ratio than its sector. But there are key positives for K&R as well.

As per Trendlyne data, K&R's Debt to Equity Ratio of 0.17 is less than 1 and healthy, implying that its assets are financed mainly through equity. Also, its Interest Coverage Ratio is 3.92, higher than 1.5, which means that it can meet its interest payments comfortably with its earnings (EBIT). Further, its Promoter Pledges are zero.

In the case of technicality, two key moving averages of the stock namely RSI and MFI are at 53.9 and 66.4 which is stable. This is because RSI and MFI above 30 score are usually oversold indicators for the stock, and the move averages if above 70 are hinted to be overbought. Also, K&R Rail is trading below 4 out of 8 SMAs, and also below 4 out of 9 Oscillators in the bearish zone.

K&R Rail Engineering Stock Split:

On July 14th, K&R Rail announced its first-ever stock split in the ratio of 1:10. This means that the company will sub-divide its 1 existing equity share having a face value of Rs 10 each into ten smaller shares having a face value of Re 1 each fully paid-up.

K&R Rail said the Record Date for subdivision of equity shares will be intimated to the Exchanges subsequently, after the approval of the resolution for sub-division by the shareholders at EGM.

The reason behind the stock split is to enhance the company's liquidity and encourage the participation of small investors by making it more affordable.

The company is expecting to complete its stock split action in approximately 3 months from the date of receipt of approval from the shareholders of the company.

How does stock split works out? Taking the example of current market price which is Rs 491.60 apiece, so applying 1:10 ratio, then 1 K&R Rail share will become cheaper and trade at Rs 49.16 apiece (Rs 491.60/10). This is just an example, and the stock split ratio will apply to the price level that will be on record date or ex-split date.

K&R Rail Engineering was founded in 1998 with a vision to cater to the ever growing demand for Mass Transportation & Bulk Logistics of Goods & Materials through the Indian Railway networks.