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The board of directors of Infosys Ltd sprang a surprise today by recommending a bonus issue of shares in the ratio of 1:1 (one equity share for every equity share held) and a stock dividend of one American Depositary Share (ADS) for every ADS held.
It is the second 1: 1 bonus issue announced by the company in the last six months as it had made a bonus issue only in December 2014.
It was on October 10, 2014, that the company had recommended a bonus issue of one equity share for every equity share held (1 : 1 bonus issue) and a bonus issue, viz., a stock dividend of one ADS for every ADS held. Subsequently, Infosys Ltd fixed December 3, 2014, as the record date for the purpose of allotment of bonus shares / stock dividend.
Infosys Ltd’s board today has recommended a final dividend of ₹29.50 per share (equivalent to ₹14.75 per share after 1:1 bonus issue, if approved by shareholders) for the year ended March 31, 2015.
Acting swiftly to get the approval process completed, the company said its register of members & share transfer books will remain closed from June 17 to June 22 for the purpose of payment of final dividend & the AGM will be held on June 22.
The company’s equity base is at ₹574 crore as at the end of March 31, 2015. This was after the bonus issue made in Dec last year. But despite the doubling of the equity base, the company’s EPS at the end of last fiscal was at a healthy ₹102.33 as compared to ₹89.20 at the end of March 31, 2014. This gives it shares a P/E ratio of about 20 (at the current value of around ₹2010) which does not look to be very high compared to its peers such as TCS (P/E of 23) and Tech Mahindra (P/E of 25). The latter had implemented a 1:1 bonus issue and also a stock split of 2:1 ( face value of shares reduced to ₹5 from ₹10).
Despite the bonus announcement, the Infy shares are down by about ₹ 120 to ₹ 2001 levels now. A deeper analysis of Infosys results would throw further insight into its performance in terms of profitability ratio etc compared to its peers and explain the reasons for investor response.
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