22 Oct , 2021 By : Kanchan Joshi
Shares of Indian Energy Exchange (IEX) surged to 10% upper circuit level in Friday's opening deals at Rs832 apiece on the BSE after the exchange on Thursday announced that its board has recommended issuing bonus shares in the ratio of 2:1, which is subject to the approval of shareholders.
The board in its meeting on Thursday recommended a bonus issue of equity shares in the proportion of two shares of Re 1 each for every one existing share of Re 1 each held by the shareholders as on the record date. The bonus shares will be issued out of the free reserves created out of the profits of the company available as at March 31, 2021.
“IEX has been an outperformer among power companies with it’s share price rising 110% in last six months compared by 15% growth in the power index. This makes the stock extremely attractive from a valuation as well as a momentum perspective. The bonus issue will infuse liquidity into the stock as well, which makes it a good bet for investors in our opinion," said Sonam Srivastava, Founder, Wright Research.
A company issues bonus shares for their shareholders in order to increase the liquidity of the stock as well as with the aim to decrease its stock price to make if affordable for investors. Bonus shares are fully paid additional shares issued by a company to its pre-existing shareholder.
“We believe that IEX shall continue to dominate market share as is the case with other exchanges (lik MCX etc.). The valuations certainly look stretched even after the recent fall in stock prices post the bonus issue news. We could see a phase of consolidation in IEX in the short term and hence advice investors to buy on significant dips below the 750 price mark," said Ujjawal Kumar, Research Analyst, Green Portfolio.
The exchange reported a nearly 75% rise in its consolidated net profit at Rs77 crore for the September quarter, mainly on the back of higher revenues. IEX is the premier electricity exchange in India, which facilitates electricity trade. IEX commands a market share of around 95% in the power exchange market.
Mudit Goel, Senior Research Analyst at SMC Global Securities said, "Post 2:1 bonus adjustment, one should try to buy fresh stake at around Rs450 to Rs470 per share levels for short-term target of Rs600. However, one must maintain strict stop loss at Rs400 while taking this position in IEX counter."
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