The Telegraph
Since 1st March, 1999
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Investors feast on stock lollies

Mumbai, April 22: The bonus bandwagon rolled at pharmaceuticals firms, lavishing handsome payouts days after technology titans played Santa to their investors.

Today, it was the turn of Sun Pharma to dole out the goodies — a generous 1:1 bonus. It was joined by Wockhardt, whose investors were administered a two-way dose. A 1:2 bonus was packed in with a plan to split its ten-rupee share into two with a face-value of Rs 5.

A stock-spilt is similar to a bonus in so far as it increases the number of shares. However, in a bonus, the reserves come down by the number of shares issued afresh. This is considered as a dilution in equity.

Typically, a company splitting its stock gives out additional shares to existing investors by reducing the face-value.

One such firm was Cipla, which approved a split in its shares from Rs 10 to Rs 2 at an extra-ordinary general meeting convened on Wednesday.

“Have you realised that from the time you started to speak you are richer by a lakh,” chairman and managing director Y. K. Hamied told a shareholder who was holding forth on the large number of shares she held.

Almost all drug makers have seen a sharp rise in their fortunes in the previous year. Hamied pointed to the fourth-quarter scorcher that saw Cipla profits soar 117 per cent.

The bonus bonanza hasn’t been coming only from the technology or pharmaceutical majors. Old-economy firms have endeared themselves to their investors in much the same manner and to an equal degree.

Last week, the UP-based sugar manufacturing company Bajaj Hindustan split each share from Rs 10 to Re 1 each in an effort to deepen its shareholder base of 8,500. Chief Shishir Bajaj talked of requests from shareholders for the stick split. “Look at Reliance, they have three million shareholders,” he argued.

Hindustan Bajaj is among those companies whose shares have leapt 10 times in the space of a year. “Business cycles like these do not happen always,” said an analyst. No wonder, they deem it fit to pamper investors.

Early this month, Infosys Technologies and Wipro announced bonus issues within days of each other. The charm was laid thick at a time when they were expected to be cautious because of the shrill outsourcing outcry in the US and a runaway rupee rise.

Narayana Murthy’s Infosys announced a bonus of three shares for every one held; Wipro followed it up with a 2:1. This was in addition to the fat dividends they doled out.

Jerry Rao’s MphasiS was the first to court investors, with a bonus of one share for each already held. Other worthies in the bonus brigade included Alembic, which declared a two-for-one issue. Marico, the leading hair care company, also oiled its stock with a 1:1 issue.

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