2:1 bonus shares: Multibagger SME IPO turns ₹1.14 lakh into ₹6.48 lakh in seven years

Bonus shares effect: A long term investors not just gain from stock price appreciation but from other rewards like dividend, bonus shares, stock split, buyback of shares, etc. At one look these rewards that a listed company announces from its capital reserves may not look attractive but in long term these rewards lead to whopping return in one's long term shareholding.

Those who believe in examples, they can look at Mitsu Chemplast shares. The initial public offering (IPO) of this SME stock was offered in August 2016 at ₹95 per equity share. Investors were allowed to apply in lots and one lot of the BSE SME IPO was comprising 1200 company shares. The SME issue listed on BSE SME exchange at ₹96 apiece, delivering a paltry listing gain of Re 1 per share to the allottees. However, if an investor had believed in its conviction that he or she had developed after scanning the financials of the company before applying for the IPO. The SME stock declared bonus shares in January 2020 in 2:1 ratio. This means, two bonus shares were rewarded for every one stock held by the company shareholder on bonus share record date.

Mitsu Chem Plast bonus share history

As per the information available on BSE website, Mitsu Chem Plast Ltd traded ex-bonus on 28th January 2020. The board of directors of the company had declared bonus shares in 2:1 ratio. So, if an allottee of the SME IPO had remained invested in the scrip despite muted listing, its shareholding in the company would have tripled after receiving two bonus shares in one's demat account after issuance of bonus shares.

Mitsu Chem Plast IPO details

Mitsu Chem Plast IPO was launched in August 2016 and the company had fixed issue price at ₹95 per equity share. Mitsu Chem Plast IPO lot size comprised 1,200 company shares that means minimum amount required to apply for the SME IPO was ₹1,14,000 ( ₹1200 x 95). So, after issuance of bonus shares in 2:1 ratio in January 2020, these 1200 shares would have surged to 3,600 company shares without any further investment.

₹1.14 lakh turns to ₹6.50 lakh today

If an allottee had remained invested in this BSE SME stock despite tepid listing, its net shareholding in the company had been 3,600. Mitsu Chem Plast share price today is around ₹180 apiece. Thus, absolute value of ₹1.14 lakh would have become ₹6.48 lakh ( ₹3,600 x ₹180) today.

Therefore, if an allottee had remained invested in this stock till date, then after receiving bonus shares, its ₹1.14 lakh would have turned to ₹6.48 lakh today.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.