Explained: Mother’s Sumi, Breeding Mother’s 32%crashed. Bonus issue explains a sharp price reduction

On Friday, July 18, the shares of Breeding Mother’s International and Mother’s Sumi wiring appeared to sink more than 32% of the trading, with sharp prices in investor demat accounts. But the steep drop was not a market route, it was a technical arrangement following the 1: 2 bonus issues of the companies that are effective today, accordingly the stock prices were revived and no effect on the overall value of shareholder holdings.

Bonus Issue of Breeding Mother’s

In the last three decades, after the company’s 1: 2 bonus issue, the breeding Mother’s stocks started trading the former bonus on Friday. Shareholders will receive a bonus share for every two stocks held according to the record date, which was fixed for July 18. Thursday was July 17 to buy shares and be eligible on the last day.

For example, 100 bonus shares will be allocated to an investor with 200 stocks, which will increase the total number of shares by 300, the counter-share price will be adjusted.

Thursday, July 17, the breeding Mother’s stock closed at Rs 153.85 on the BSE. On Friday morning, it opened at Rs 104.65, which reflects the bonus arrangement by about 32% on paper. The stock was trading 0.3% more in the middle of the morning.

This marks the 10th bonus by breeding Mother’s from November 2000.

First Bonus after Demerger for Mother’s Sumi Wiring

Applying the Demerged Entity of Breeding Mother’s, Mother’s Sumi Wiring, 1: 2 Bonus Issue, is the first after the list. The record date was also July 18.

Shares of Mother’s Sumi Wiring closed at 64 64..40 on Thursday and opened at Rs 43.70 on Friday, indicating a reduction of% on paper, a direct result of the bonus arrangement. Stock was up 2.5% in the initial trade.

Bonus ratio is entitled to a bonus share for each of the two stocks held to shareholders. For example, 100 shares investors will receive 50 bonus shares, which will make their total holdings 150.

There is no change in investment value

Although, on paper per stock, paper seems to have dropped significantly, investors have not lost any value. The total cost of their holding remains unchanged as the number of stocks increases to offset the low cost.

For example, the shareholder has 300 shares of Mother’s Sumi Wiring at Rs 60, which costs a total of Rs. 18,000 is priced, now the same overall investment value will keep around 450 stocks around Rs 40.

Also read | Mother’s Sumi, Breeding Mother’s International Share Bonus Share Issue Rows up to 4% on Record Date

Bonus shares are deposited next week

Both companies have announced that the allotment date for bonus shares will be Monday, July 21. These bonus shares will be made available for trading on the next working day, that is, Tuesday, July 22.

(Disclaimer: The recommendations, suggestions, opinions and views given by experts are their own. This does not represent the views of the economic time)