Bhavikk Shah on Ex Bonus Rates of Limited Bonus Issues ( For Non Promoters / Public Only )

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Old / Original POST by Bhavikk Shah

Bonus Shares For Non Promoters Only - What Would Be Ex - Bonus Price ?

In case of normal Bonus Issues , the Ex Bonus Rate falls Proportionately

Example : Balmer Lawrie and Company

Pre Bonus Rate Rs. 700

Bonus in the Ratio of 3 : 4

4 shares become 7

Ex Bonus Rate 4 x 700 = 2800 , divided by 7 = Rs. 400

But , these days a new development has taken place . Some Companies , to comply with Minimum 25% Public Holding Directive of SEBI  ,are issuing Bonus shares only to their Non Promoters

Example

UP Hotels 

Bonus Ratio : 31 Bonus Shares For 20 Held

http://www.rareindianshares.info/2013/05/up-hotels-bonus-issue-non-promoters.html

Here , around 12 %  shares are held by the Non Promoters

http://www.rareindianshares.info/2009/09/u-p-hotels-limited.html

                          or

Ras Resorts

Bonus Ratio

1 : 5 ( Please Recheck )

http://www.moneycontrol.com/india/stockpricequote/hotels/rasresortsaparthotels/RRA



Q -WHAT WOULD BE THE EX BONUS RATES IN SUCH LIKE CASES OF LIMITED BONUS ISSUES ??

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Answer  By Bhavikk Shah

As for the bonus to non-promoters are concern- the equation remains the same that is -

At present UP HOTELS CMP is Rs. 353.90 per share . It declared bonus of 31 new for every 20 held - so after bonus the price FOR INDIVIDUAL INVESTOR should be Rs.138.78/share.
(CMP Rs.353.90 x 20 all ready held = Rs.7078; Bonus of 31 new so your total investment of Rs. 7078 remains the same but the total number of shares increase to 51 shares , so Rs. 7078/51 = Rs.138.78/sh)

Now, for promoters -
Company has total of 54,00,000 shares - promoters hold 88.39% or 47,72,960 shares.

NOW - AFTER BONUS -
Co's 54,00,000 shares will become 63,71,912 shares (Total shares 54,00,000; bonus to non promoter so minus the promoter holding of 47,72,960 from this 54,00,000 = 6,27,040 shares;Bonus is of 31 new for 20 held so- 6,27,040 divide by 20 already held will give you 31,352 shares multiply this by 31 new shares will give you 9,71,912 new shares ; Add this 9,71,912 with 54,00,000 will give you 63,71,912 shares)-
now, promoters will not be getting Bonus so their holdings remains same at 47,72,960 shares but their percentage will be reduced from 88.39% to 74.90% a reduction of dot 13.49% in promoters holding. This is also one kind of dilution.

BUT this promoter dilution will impact the market cap and co's MCAP before bonus is 54,00,000 Shares X CMP of Rs.353.90 = Rs.191,10,60,000 Cr
Now divide this 191 Cr with new Total shares = Rs. 191,10,60,000 / new total shares of 63,71,912 = Rs. 299.91
I think UP HOTELS should trade near Rs.300 after bonus.

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REGARDS
BHAVIKK SHAH
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Blog 's extreme gratitude to Bhavikk Shah for his brilliant analysis.