This Stock Will Turn Ex-Bonus Soon: Check If You Wish To Own It

Bonus shares are stocks issued in a certain proportion by a company to its current shareholders at no additional cost. Say, a 2:1 bonus issue by a company means that for every one share you own in the company, you will get 2 more shares. New shares are issued at the current face value of equity shares of the company, while the face value continues to be the same post-bonus issue.

The company goes for a bonus issue of shares to distribute gains of accumulated earnings without paying cash to the shareholders. Also, as the number of outstanding shares goes higher, liquidity in the stock increases. Other effects of bonus issue are as following:

1. Reduces share price in proportion to number of bonus shares issued.

2. Reduces free reserves and surplus of the Company.

3. Creates implicit value per equity share

4. Reduces per share ratios (for e.g: EPS, Book Value per share, etc.)

Further announcement of bonus shares by a company give out positive signals to the street that the company is rightly treading on the path of long term growth.
So, here we discuss a stock that has declared bonus share issuance and will soon turn ex-bonus.

What is ex-bonus date?

To be eligible for bonus shares, record date and ex-bonus date matter. Record date is the cut-off date announced by the company and it is precisely on this day that the company decides the eligibility of shareholders for the bonus shares. To be eligible for bonus shares, shareholders should be owing the stock before this date. Ex-date on the other hand is a day preceding the record date set by the company and to qualify for receiving bonus shares, shares of the company must be bought before the ex-date.

So, as you might have figured out now why ex-bonus date holds relevance, we will straight away move to the stock:

Indo US Bio-Tech

Headquartered in Ahmedabad, Gujarat, Indo US Bio-Tech is a specialized agriculture seed company. The company is into the manufacturing of vegetables, pulses, oils, and spices, as well as cereals.

In an exchange filing on November 3, 2021, the company informed that the proposal of Issue of 12,13,598 Equity Shares ('the Bonus Shares') of the Company of Re.10/- each (Rupee Ten only) at par, to be allotted, distributed and credited as fully paid-up to and amongst the members in the proportion of 1 new equity shares for every 5 existing fully paid equity shares has been approved by the company's shareholders.

For the purpose of determining the eligibility of shareholders for the bonus shares, the record rate is set at November 30, 2021, while the stock shall turn ex-bonus on November 29, 2021.

Decent financials and key technical parameters make the stock attractive

Talking about its financials, over the past 5 years, the company's revenue surged 63.3 percent from Rs 24.6 crore in FY2017 to Rs. 40.13 crore in Fy21. PAT climbed 12.75 times during the similar period to Rs. 5.1 crore in the FY 2021 as against Rs. 0.4 crore in FY17. On a YTD basis, the stock has generated 131%, while 1 year return is 98 percent. Promoters have been increasing their stake in the company over the last 2 years.

The scrip looks promising considering decent financials and key technical parameters such as RSI, momentum, and 10-day/20-day/30-day/50-day/100-day/200-day EMA, barring MACD.

Disclaimer:

Stock market investments are risky, here we have just summarised a stock that will be issuing bonus shares, readers should not construe it to be an investment advice in the scrip.

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