Navratna PSU giant, RITES Ltd will be in focus in the trading week from September 23 to 27, as the company has announced the allotment of bonus shares to eligible shareholders in the ratio of 1:1. Adjusted to the bonus ratio, the stock which traded around Rs 700, is now below Rs 380. With the new Sebi rule of T+2 for bonus shares, will the RITES bonus get credited into the demat account on Monday or Tuesday or will it take 10-15 days?
RITES Bonus Issue Allotment:
RITES announced that at their meeting held on September 21, 2024, the company had allotted 24,03,01,887 (Twenty-Four Crore Three Lakh One Thousand Eight Hundred and Eighty-Seven) fully paid-up Bonus Equity Shares of the face value of Rs. 10/- each in the ratio of 1:1 i.e., One (1) fully paid-up Equity Share of Rs. 10/- each for every One (1) existing Equity Share of Rs. 10/- each.
The record date for identifying eligible shareholders was fixed on September 20. Hence, only these investors who held RITES shares in their demat account by the end of September 20 will be eligible. This was also the ex-date for the bonus shares.
Pre-bonus issue, RITES paid-up share capital stood at 24,03,01,887 shares, at a face value of Rs 10 each, for Rs 240,30,18,870.
With a 1:1 bonus issue, the paid-up share capital has doubled to 48,06,03,774 shares, with a face value of Rs 10 each, for Rs 480,60,37,740.
During a bonus issue, the number of shares increases in the demat account, while the price of the stock gets adjusted.
So when will investors get RITES bonus shares in their demat account?
At the latest, market regulator Sebi has decided to reduce the time taken for credit of bonus shares and trading of such shares, from the record date of the Bonus Issue. The settlement type for the bonus issue will be T+2. Simply put, you will be able to receive your bonus shares in the demat account in two days from the record date from the earlier timeframe of two weeks.
However, Sebi's new rule will come into effect from October 1, 2024, and most likely bonus shares from this date will be eligible for a 'T+2' settlement. Hence, RITES bonus shares could take between 10-15 days to credit in the demat account.
In general terms, as per Angel One, the bonus shares will get credited to your DEMAT account. The process usually takes 10-15 days. Bonus shares are additional shares allotted free of cost to shareholders. Companies reserve a portion of their profit, a part not paid as a dividend, over the years and when the free reserve grows to a substantial volume, they release bonus shares from that.
RITES Share Price:
On NSE, during the record date, RITES share price ended at Rs 375.95 apiece, up by 10.8% with a market cap of Rs 18,068.30 crore. Adjusted to bonus issue, the stock's new 52-week high and low is Rs 412.98 apiece and Rs 216.15 apiece.
Notably, before the bonus issue record date i.e. September 19, RITES share prices were at Rs 683 apiece on NSE.
How Much Gains Investors Will? Let's say an investor has 500 shares in RITES as of September 20, their value will be at Rs 3,41,500. At the bonus issue ratio, 500 shares will receive 500 bonus shares, taking the total number of shares to 1,000. While the price will become half. On September 20, RITES touched an intraday low of Rs 354.65 apiece before closing at Rs 375.95 apiece. However, share capital remains the same.
On the day of the record date, 1000 shares at Rs 375.95 = Rs 3,75,950, which is higher by Rs 34,450 compared to 500 shares at Rs 683.
In the long-term, investors win big in the RITES bonus. For instance, as per NSE data, during the first year of COVID-19, which was in 2020, RITES' lowest price level was Rs 190.65 which was recorded on March 24, 2020. If an investor bought 500 shares at Rs 190.65, their investment value would have been Rs 95,325. Gains would be around Rs 2,80,625 or 294.4% at 1,000 shares of Rs 375.95 each. This is just an example, the gains will vary in future owing to price movement, and also after the shares are credited.
BUY/SELL RITES Ltd:
As per Trendlyne data, the consensus recommendation from 4 analysts for Rites Ltd. is HOLD. EPS is expected to grow by 1.8% in FY25. Among fundamentals of RITES stock, the positives are - Debt to Equity Ratio is zero as the company is debt-free; Price to Earning Ratio is 42.06, lower than its sector PE ratio of 43.2; Return on Equity(ROE) for the last financial year was 17.45%, in the normal range of 10% to 20%; Promoter Pledges are zero; and Interest Coverage Ratio is 155.04, higher than 1.5. This means that it can meet its interest payments comfortably with its earnings (EBIT).
RITES Limited, a Navratna and Schedule 'A' Central Public Sector Enterprise under the Ministry of Railways, incorporated on April 26, 1974, is a multidisciplinary engineering and consultancy organization, providing a comprehensive range of services from concept to commissioning in all facets of transport infrastructure and related technologies. The company's market capitalization has placed it among the top 500 listed companies in India, a testament to the high-quality solutions and services it delivers, driven by its talented pool of professionals.
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