Ind-Swift goes in for equity split
Rs 10 Face Value Share Split into 5 equity shares of Rs 2 each
Legendary investor Warren Buffet has often disapproved of the stock splits. The Chairman of Bulk Share Hackway feels that this practice leads to stocks changing hands more frequently, thereby, hurting the long term investor. However, Indian companies clearly differ with Buffet on this count as lately, many of them have distorted to splitting their stocks.
After Gujarat Ambuja’s announcement yesterday the latest to join the band wagon is Chandigarh based pharmaceutical Company Ind-Swift Ltd. Its Chairman Dr. Munjal today announced the split of equity shares capital of face value of Rs. 10 into equity shares of Rs. 2 each. Talking to ET, Ind-Swifts Company Secretary Pradeep Verma said, "The purpose is to increase the liquidity and enhance greater volumes of trade." Along with a market capitalization of Rs. 220 crore, Ind-Swift, paid up capital amount to Rs. 7.7 crore which after the split will consist of 3,63,78,370 equity shares of Rs. 2 each.
Analysts have given thumbs up to the Company’s decision. Gurmeet Chawla of Master Capital Services Ltd. feels that Ind-Swift has a strong R&D and impressive market capitalization and the split projects confidence in the Company's earnings prospects, which, inevitably will result in the share price rise." It would make Company's stock accessible to a greater number of investors.
The biggest advantage of the split is that it bring the small retail investor in the picture who otherwise finds it difficult to purchase shares as shares are picked in bulk by institution", he told ET. But there is a word of caution as well. Shares split tend to trigger high performance expectations and if the Company's future results disappoint investors, there can be quick withdrawals. But so far Ind-Swift Ltd. performance has been impressive. Its net profits over the past few years have registered consistent double digit growth. Most importantly the revenues have been flowing in thick and fast. Set up in 1984 Ind-Swift Labs. Ltd. has built up a vast product line comprising of injectables, tablets, capsules, ointments, eye & ear drops. It was set up in joint venture with Punjab State Industrial Development Corporation (PSIDC) and went public in 1997. At the end of the last fiscal, its Board of Directors had approved issue of GDR/ convertible securities up to $25 millions.
It has to ensure that the growth continuous because the stock split leaves it with very little room for disappointment. |