IRCTC shares have gone ex-split: Here’s everything you need to know about stock splits.
IRCTC’s stock price was quite high for small investors before the split, but after the split, the share price had dropped to around 900, making it more appealing to investors.
IRCTC shares turn ex-split
The stock of IRCTC has increased by 16 percent since the stock was split in a 1:5 ratio. Let’s look at how stock splits work and why they’re beneficial to investors.
Indian Railway Catering and Tourism Corporation (IRCTC) shares rose 16% on Thursday after the stock went ex-split. The company had set October 29 as the record date for the 1:5 stock split. On August 12, the IRCTC board of directors approved a stock split.
This essentially means that each stock will be divided into 5 shares. This increases the stock’s liquidity by lowering its stock price, making it more affordable to investors.
The stock reached a record high of 1,279 (adjusted for stock split) on October 19, 2021, and has more than doubled investor wealth in the last three months, rising more than 100 percent. In comparison, the benchmark Sensex has gained approximately 16% during this time period.
Read : How To Block Your Phone Pe, GPay & Paytm Account | How to Cancel Tickets Purchased at Counters via IRCTC Website (Online)
Recognizing Stock Split
A stock split increases the number of shares issued by a company; in this case, the total number of shares will increase fivefold, but the share price will fall. This, in turn, has no effect on the firm’s market capitalization. Existing shares fall in value but remain unchanged.
In the case of IRCTC, for example, if an investor owned 5 shares of the company, the number of shares will increase to 25, the stock price of each share will fall, but the underlying value will remain the same.
The primary purpose of a stock split is to make shares more affordable to shareholders. It usually happens after a significant increase in the price of a stock. Prior to the stock split, IRCTC shares were trading around 4000, despite a steep drop from its all-time high of 6,369 on October 19, 2021.
IRCTC’s stock price was quite high for small investors before the split, but after the split, the share price had dropped to around 900, making it more appealing to investors.
It not only benefits existing investors by increasing the number of shares they own, but it is also good news for future investors who were unable to invest in the stock due to its high price.
During a stock split, no additional costs are incurred. The firm’s fundamentals, such as profit, revenue, operational costs, and so on, are unaffected by a stock split, nor is the firm’s market cap.
Going forward
Going forward, the fundamentals of IRCTC are very strong, and analysts recommended holding the stock rather than buying at the previous price (before the stock split) due to higher valuations. The stock is now more appealing to investors as a result of the split.
Along with the stock split announcement, an increase in railway bookings as the economy improves and more people seek to travel as a result of vaccination drives, as well as a decrease in COVID cases, are all very positive for the stock.
The railway catering company made a net profit of 82.52 crore in the June 2021 quarter, compared to a net loss of 24.60 crore in the same quarter last year. Its operating revenue increased by 85.4 percent year on year to 243.4 crore.
Moving forward, the firm’s expansion plans, such as moving its business to bus, air, and tour and travel planners, could open up a whole new potential opportunity for the firm to strengthen its position.
IRCTC has a monopoly because it is the only authorised company to provide online tickets and catering services to Indian railways. It has a 73 percent market share in online rail bookings and a 45 percent market share in packaged drinking water, respectively.
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