On Friday 3 July 2020, Muthoot Finance, in its regulatory filing, said that the company is planning to approve a proposal for subdivision/ stock split of equity shares of the company, subject to shareholders’ approval, in a Board meeting that is scheduled to be held on 18 July 2020.
The non-banking financing company (NBFC) will also seek approval of its shareholders for increasing the borrowing powers of the company. The proposal would be set up to increase that amount from existing Rs 50,000 crore to Rs 75,000 crore, it added.
Muthoot Finance Ltd. is an India based Finance Corporation that was incorporated as a private company on 14 March 1997. It is known as the world’s largest gold financing company. Apart from this, the company also deals in foreign exchange services, money transfers, wealth management services, travel, and tourism services, and sells gold coins at Muthoot Finance branches. It is headquartered in Kerala and operates from over 4,400 branches across India. The company also operates in the United States, the United Kingdom, and the United Arab Emirates. It falls under the umbrella entity of Muthoot Group and is listed under both National Stock Exchange and Bombay Stock Exchange.
In the stock split process, the company divides its existing shares into multiple shares in order to boost the liquidity thereof. It causes a decrease in the market price of individual shares; however, the market capitalization of the company remains constant. Generally, the practice is followed when the market price per share is very high and it stymies small investors from investing in such stocks.
Earlier, Office Depot Inc., a leading provider of business services, products and technology solutions, announced that it will resort to reverse stock split with effect from 30 June 2020. The Florida based tech company works on a fully integrated B2B platform with its distribution channel comprising 1300 stores, online presence, and other sales professionals.
Altus Midstream, Intrepid, Golden Matrix Group, and Genufood Energy Enzymes Corp. are some of the other entities that have announced the reverse stock split in the recent past.
After the announcement, the share price of Muthoot Finance gained 3.8 percent in a single day. The price rose to Rs 1,150.8 compared to the previous close at Rs 1,108 on the Bombay Stock Exchange. In the last four days, the stock has gained 5.5 percent. A total of 0.94 lakh shares were traded, amounting to a turnover of Rs 10.71 crore. The firm’s Market Cap rose to Rs 45,970 crore. Also, the stock has gained 79.87 percent and risen by 50.46 percent since the last year.
The non- banking financing company had posted a consolidated net profit of Rs 2,103 crore in the financial year 2018-19. On 19 June 2020, the stock hit an all-time high of Rs 1,283.95, after the company announced 59 percent growth in Quarter-4 profit. During the quarter, it's gold loan assets increased by Rs 3,113 crore.
