Bajaj Finserv stock split

Bajaj Finserv stock split: Zerodha boss Nithin Kamath says there is panic among many investors because...

Bajaj Finserv stock split: Zerodha boss Nithin Kamath says that bonus or split is like having 2 chocolates of 50 gms instead of 1 of 100gms

Bajaj Finserv, the non-banking finance company, will split one existing equity share into five equity shares today. Zerodha founder Nithin Kamath took to Twitter to explain what a stock split means and does it have any impact on retail investors. He said there everytime a company announces a stock split, there is panic or greed among many investors because they think that the stock has become cheaper. “Every time a popular stock goes ex-bonus/split & the price drops on ex-date, there is panic or greed among many investors because they think they've made a loss or that the stock has become cheaper.," Nithin Kamath tweeted.

Bonus or split is like having 2 chocolates of 50 gms instead of 1 of 100gms. Makes no difference, the Zerodha boss said in another tweet.

What does the Bajaj Finserv stock split mean for investors?

A bonus issue and stock split just increases the number of shares and doesn't mean a stock has become cheaper. It has no impact on the value of your investment or on the fundamentals of the company.

What is a stock split?

A stock split increases the number of shares that are outstanding by issuing more shares to the current shareholders.

Let’s say you had a stock with a face value of ₹10 and a price of ₹500. If there’s a split in the ratio of 2:1, the face value will become ₹5, and the price will drop to ₹250 on the ex-date of the split.

If you purchased 1 share at ₹500 with a face value of ₹10 before the split, you would now own 2 shares at face value of ₹5 at an average price of ₹250 per share after the split.

The split shares are credited to your demat account within two working days for the record date.

Bajaj Finserv fixed 14 September 2022 as the 'record date' for its stock split and bonus shares issue. While declaring its Q1FY23 results, the company had said that its board has also approved the proposal of stock split or sub division of equity shares in the ratio of 1:5 as well as gave its nod for the issuance of bonus shares in the ratio of 1:1