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The recent dramatic fall in BSE Ltd.'s share price, a 66% plunge during Friday's trading session, sent shockwaves through the investment community. However, the decline wasn't due to any inherent weakness in the company's fundamentals or a downturn in its financial performance. Instead, the sharp drop was a direct consequence of the stock turning ex-bonus following the company's previously announced 2:1 bonus issue. This event serves as a crucial reminder for investors to understand the mechanics of bonus issues and their impact on share prices. A bonus issue, often referred to as a scrip issue or capitalization issue, involves a company distributing additional shares to its existing shareholders without any additional cost. This is typically done by capitalizing the company's accumulated profits or reserves. In the case of BSE Ltd., shareholders will receive two fully paid-up equity shares (with a face value of Rs. 2 each) for every existing share they hold. The record date for determining shareholder eligibility was May 23, 2025, and the deemed allotment date is May 26, with the bonus shares scheduled to commence trading on May 27. Understanding the ex-bonus date is paramount. The ex-bonus date is the date on which the shares start trading without the entitlement to the bonus issue. In other words, if an investor purchases the shares on or after the ex-bonus date, they will not be eligible to receive the bonus shares. Conversely, investors who purchased the shares on or before the day preceding the ex-bonus date (in this case, May 22, given the T+1 settlement cycle) will be entitled to the bonus shares. The price adjustment observed in BSE Ltd.'s share price reflects this very principle. When a stock goes ex-bonus, its price is theoretically reduced to reflect the increased number of shares outstanding. The idea is to maintain the overall market capitalization of the company. The price decrease ensures that the total value of an investor's holdings remains approximately the same immediately after the bonus issue as it was before. Without this adjustment, there would be a sudden artificial increase in the market capitalization, which would not accurately reflect the company's intrinsic value. Therefore, the 66% decline in BSE Ltd.'s share price isn't indicative of any underlying problems within the company; it's simply a technical adjustment to account for the bonus issue. It is important to emphasize that a bonus issue, in itself, does not create or destroy value. It simply redistributes the existing value across a larger number of shares. The intrinsic value of the company remains the same, assuming that the bonus issue doesn't coincide with any other significant events or changes in the company's prospects. Investors should avoid panicking when they see a sharp drop in share price following a bonus issue. Instead, they should recognize that it's a normal and expected outcome. It's crucial to look beyond the price movement and focus on the company's fundamentals, its financial performance, and its long-term prospects. In the case of BSE Ltd., the company's latest financial results paint a rather positive picture. The company reported strong revenue growth and a substantial increase in net profit, indicating improved operational efficiency and cost control. These factors should provide reassurance to investors that the company is on a solid footing, despite the temporary price volatility associated with the bonus issue.
Beyond the technicalities of the bonus issue, a closer examination of BSE Ltd.'s financial performance reveals a company exhibiting robust growth and profitability. In Q4 FY25, the company reported consolidated revenue of Rs. 917 crores, a remarkable 70.13% year-on-year increase from Rs. 539 crores in Q4 FY24. This significant jump in revenue indicates a strong demand for the exchange's services and a successful expansion of its business operations. Furthermore, the company's revenue also experienced sequential growth, increasing by 11.15% from Rs. 825 crores in Q3 FY25. This consistent growth trajectory suggests that BSE Ltd. is effectively capitalizing on opportunities within the market and maintaining its competitive edge. The company's net profit also witnessed a substantial surge. In Q4 FY25, BSE Ltd. reported a net profit of Rs. 494 crores, a staggering 361.68% increase from Rs. 107 crores in the same quarter of the previous year. This impressive growth in net profit is a clear indication of the company's improved operational efficiency and effective cost management strategies. The sequential growth in net profit was also notable, increasing by 125.79% from Rs. 219 crores in Q3 FY25. This consistent improvement in profitability demonstrates the company's ability to generate substantial returns and create value for its shareholders. In addition to its strong revenue and profit growth, BSE Ltd. also boasts impressive financial ratios. The company's Return on Capital Employed (ROCE) stands at 31.46%, indicating that the company is effectively utilizing its capital to generate profits. Similarly, the company's Return on Equity (ROE) of 29.97% demonstrates its ability to generate returns for its shareholders. These high returns on capital and equity are indicative of a well-managed and financially sound company. The company's Price-to-Earnings (P/E) ratio of 71.72 is higher than the industry P/E of 46.93, suggesting that the market has high expectations for the company's future growth potential. However, it's important to note that a high P/E ratio can also indicate that the stock is overvalued. Therefore, investors should carefully consider other factors, such as the company's growth prospects and its competitive landscape, before making any investment decisions. BSE Ltd. also maintains a strong financial position, with a current ratio of 1.59. This ratio indicates that the company has sufficient current assets to cover its current liabilities, providing it with a comfortable margin of safety. Furthermore, the company has a debt-to-equity ratio of nil, indicating that it has no debt on its balance sheet. This debt-free status provides the company with financial flexibility and reduces its risk exposure.
The shareholding pattern of BSE Ltd. reveals a diversified ownership structure. As of March 2025, the company has no promoter holding, which is somewhat unusual for Indian companies. This lack of promoter holding can be both a positive and a negative. On the one hand, it can reduce the potential for conflicts of interest and improve corporate governance. On the other hand, it can also make the company more vulnerable to hostile takeovers. Foreign Institutional Investors (FIIs) hold 16.78% of the company's shares, indicating that international investors have a significant stake in BSE Ltd. Domestic Institutional Investors (DIIs) account for 12.33% of the company's ownership, further demonstrating the institutional interest in the company. Retail investors hold the largest share of the company's stock, accounting for 48.78% of the total ownership. This high level of retail participation suggests that BSE Ltd. is a popular investment among individual investors. Other investors own the remaining 22.11% of the company's shares. Notably, ace investor Mukul Mahavir Agrawal holds a 1.18% stake in the company. The presence of a well-known investor like Mukul Mahavir Agrawal can often be seen as a positive signal, as it suggests that the company has strong fundamentals and growth prospects. In conclusion, the sharp drop in BSE Ltd.'s share price was primarily a technical adjustment related to the bonus issue. The company's strong financial performance, as evidenced by its impressive revenue and profit growth, suggests that the underlying fundamentals remain robust. Investors should carefully consider the company's growth prospects, competitive landscape, and the diversified shareholding pattern before making any investment decisions. Remember that investing in equities involves risk, and it's always advisable to consult with a qualified financial advisor before making any investment decisions. Do not rely solely on articles like this one, as they are intended for informational purposes only and should not be construed as investment advice. The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
Source: Why Did BSE Shares Crash 66% Today? Here’s All You Need To Know