Can this smallcap stock improve fortunes with stock split and bonus shares?
In many cases, corporate actions do not involve any potential future benefits to the company, as with bonus issues and stock splits. However, the market still reacts positively to the announcement of bonus shares and stock splits.
Bonus shares and stock splits are the commonly discussed corporate actions, frequently making headlines as companies use them to increase the number of their traded shares.
When a company issues bonus shares or conducts a stock split, shareholders enjoy an increase in their share count without additional cost.
However, this doesn’t significantly alter their overall wealth, as a corresponding drop in share price post-bonus or post-split balances the rise in share numbers.
Today’s article will delve into stationery products maker Linc’s bonus and stock split.
On 29 October 2024, the company approved a stock split in a 1:2 ratio. This means each share with a face value of ₹10 will be split into two shares with face value of ₹5 each, fully paid up.
Post-split, the company will have 29 million fully paid-up shares, resulting in a share capital of ₹140 crore. The company has issued a single class of equity shares.
Additionally, the board approved the issuance of bonus shares in a 1:1 ratio, where one new fully paid-up equity share of ₹5 each will be issued for every existing fully paid-up equity share of ₹5 each. The bonus shares will be issued by capitalizing ₹140 million from the securities premium account.
Following the bonus issue, the total number of shares will increase to 5.9 crore, with a share capital of ₹297 million. As of 31 March 2024, the balance in the securities premium account stood at ₹209.69 million.
The company’s board has set Friday, 20 December 2024, as the record date for both corporate actions.
Interestingly, this is the first time the company has announced a bonus issue and stock split.
Recent development
In November 2024, Linc appointed Sachin Bhatnagar as president of Global Business. Bhatnagar will drive the company’s strategic direction, manage key projects, enhance operational efficiency, and oversee the development and execution of initiatives aligned with Linc’s long-term goals.
With over three decades of experience, Bhatnagar previously served as CEO at Lykis. His leadership is expected to strengthen Linc’s global presence and growth trajectory.
A close look at financials
For the September 2024 quarter, the company reported a 3.1% YoY rise in total income to ₹13,700 crore. The net profit for the quarter was ₹880 crore, up 14% YoY.
Linc’s revenue from operations increased by 3.08% YoY to ₹500 crore in FY24.
Net profit showed a decline of 8.1% to ₹340 million in FY24.
Linc’s revenue grew at a CAGR of 6.7% from FY20 to FY24, while net profit grew at 46.2%.
Despite this, the company maintained strong financial health, with an average RoE of 11.5% and RoCE of 15.6%.
What next?
The Indian stationery and pen market is poised for robust growth, driven by a burgeoning student population, increasing literacy rates, and rising demand from corporate and creative sectors.
Valued at over ₹10,000 crore, the sector is witnessing a compound annual growth rate (CAGR) of 8-10%. With the increasing focus on education and the surge in creative professions, the scope for innovation and premiumization in the market is expanding rapidly.
This positive outlook is likely to support Linc’s performance in the Indian market. However, prospective investors should carefully evaluate the company’s financial health and corporate governance before making investment decisions.
How Linc share price has performed recently
In the past five days, Linc’s share price has been 10% higher. In the last month, it has been up 24%.
So far in 2024, its share price has risen 14%, and has surged 12% in the last year. However, both figures lag the BSE Smallcap Index, which has delivered 33% growth in 2024 and 35% over the year.
The stock touched its 52-week high of ₹768 on 26 September 2024 and a 52-week low of ₹463.2 on 13 March 2024.
Linc Share Price – 1 Year Performance
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Bonus issues and stock splits often create optimism in the market, but whether the stock will sustain its turnaround post the bonus issue and stock split remains to be seen.
About Linc
Linc, formerly known as Linc Pen & Plastics Ltd, is among India’s leading manufacturers of writing instruments, with a strong presence in over 50 countries worldwide.
The company has an extensive network across South East Asia, Middle East, the US, the UK, Europe, South America, Africa, Russia, and CIS countries.
Linc has continuously introduced new and creative products and packaging. Its diverse portfolio includes ball pens, gel pens, roller pens, retractable ball pens, dark pencils, and a variety of other stationery items.
In India, Linc is the exclusive importer and distributor for two global stationery leaders: Deli, Asia’s largest stationery brand, and Uni-ball from Mitsubishi Pencil Co., Japan.
For more details, see the Linc company fact sheet.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
