Magical benefits of investing: Effect of bonus shares and stock split
Hello friends! We all know that investing does not only give profits when the share price increases, but other announcements like bonus shares, stock split, and dividends received from time to time can also multiply our investment. When you buy a stock as an investor, not only its rising value is beneficial, but other benefits offered by the company can also make you rich. So, today we will discuss an example that turned Rs 1 lakh into Rs 25.93 lakh in just seven years.
The magical journey of Lorenzini Apparels IPO
History of IPO
The IPO of Lorenzini Apparels Limited was launched on 31 January 2018 at a price of ₹10 per share. The IPO had a lot size of 10,000 shares, and the company’s shares were listed on the BSE SME platform. The share price initially opened at ₹10.20, but the stock closed at ₹9.25 on the listing day, which was a bit of a disappointment for investors.
Announcement of Bonus Shares and Stock Split
However, the management of Lorenzini Apparels made some great announcements after this disappointing start. The company’s board announced bonus shares in the ratio of 6:11 and a stock split in the ratio of 1:10. These announcements were made in March 2024, and the shares traded ex-bonus and ex-split on March 28, 2024.
Benefits of Bonus Shares and Stock Split
Impact of Bonus Shares and Stock Split
Now the question arises that what impact did these types of announcements have on investors? Let’s understand it. If an investor invested during the IPO and held the company’s shares, he got the benefit of 1:10 stock split and 6:11 bonus shares.
After Stock Split
After the stock split, every investor got 10 times the number of shares he had before. For example, if you had 10,000 shares, then after the stock split you had 1,00,000 shares.
After Bonus Shares
After this, under the bonus shares benefit, for every 11 shares you got 6 bonus shares. This meant that you had a total of 1,00,909 shares.
How did Rs 1 lakh become Rs 25.93 lakh?
Now think carefully, an investor had invested ₹1 lakh, which was divided into 10,000 shares. After the stock split and bonus shares, his total holding reached 1,00,909 shares.
Now if we consider the current price of Lorenzini Apparels shares to be ₹25.70 (which ended on 28 March 2024), then the investor’s investment of ₹1 lakh has now turned into ₹25.93 lakh. That is, in 7 years, the investor earned a profit of about 25 times on his investment.
Lorenzini Apparels: A Multibagger Stock
Definition of Multibagger Stock
“Multibagger stocks” are those stocks that increase their investor’s money many times over time. When the price of a stock increases so much that it multiplies the investor’s investment, it is called a multibagger. Lorenzini Apparels is a great example of this.
What did this stock learn?
The success of Lorenzini Apparels has proved that the right investment at the right time and the company’s management strategies can give an investor better returns. Even a stock that was slow in the beginning later proved to be more valuable than gold for investors.
Bonus shares and stock splits: What is their real impact?
Bonus shares
Bonus shares are additional shares that the company gives to its existing shareholders without any additional investment. This is done from the profits of the company, and its purpose is to attract shareholders. The distribution of bonus shares increases the number of shares, but the total value of the company does not change.
Stock split
Stock split is a process in which the company divides one of its shares into more shares. This reduces the price of the share, but there is no change in the total value. Stock split makes it easier to buy the stock and increases its availability in the market.
Lessons for investors
Importance of long-term investment
The example of Lorenzini Apparels shows that if we select the right stocks and hold them for a long time, we can experience their true power. Benefits like bonus shares and stock splits can only be availed by long-term investors.
Risks and patience
However, it is also important that investors understand the potential risks of any stock before investing in it and still maintain patience.
Strategic investment
At present, when the stock market goes through fluctuations, the role of strategic investment becomes even more important. Invest only in a company that has the potential for big gains in the future, like Lorenzini Apparels.
Conclusion
The example of Lorenzini Apparels proves that by following the right path of investment, you can increase your money manifold. Announcements like bonus shares and stock splits can lead to increased wealth for the investor. If you are also aware of this type of investment, you can avail such benefits in the future.
5 FAQs
- What are bonus shares?
Bonus shares are additional shares that a company gives to its existing shareholders at no additional cost.
- What is the effect of a stock split?
Stock splits increase the number of shares The price decreases, but there is no effect on the total market value.
- What is a multibagger stock?
Multibagger stocks are those stocks whose price increases many times and prove to be very beneficial for investors. - Was the IPO of Lorenzini Apparels a good investment?
Yes, the IPO of Lorenzini Apparels was a good investment, because after this the company made announcements like bonus shares and stock split, which increased the profit of the investor. - What should be looked at before investing in a stock?
Before investing in a stock, it is important to analyze the financial position of the company, management policy and future prospects.