ITC declares 1:2 Bonus

ITC, one of the profitable Indian company was started as Imperial Tobacco Company of India - way back in 1910. Its name was changed to the present "Indian Tobacco Company" or ITC in 1970. From the name it is obvious that ITC deals with tobacco. But ITC has been in the business of hotels, papers since 1972. Recently they forayed a big time into FMCG business under the brand Sunfeast and Aashirwad.

ITC declared bonus shares for existing share holders on 20th May 2016. Allotment of Bonus shares is one of the way companies reward their investors for their loyalty and trust reposed on them.

If someone buys 1000 shares of ITC today, it means he/she would get bonus shares of 500. Hence his total holdings become 1500. But the fact is stock prices fall after the bonus issuance. For instance, ITC is quoting today (23rd May 2016, 1.52pm) at Rs.346. The total investment would be (1000*346) Rs.3,46,000. Post bonus the share prices would get readjusted to around Rs.230. If you see the total value of the 1500 shares @ Rs.230, the value would again be Rs,3,46,000. But many investors panic (rather let down) when they see the price slide from Rs.346/sh to Rs.230/sh.

But over a long period BONUS shares works wonders.

For instance, in 1976, ITC shares were allotted at Rs.15 per share. Till today, ITC has rewarded its share holders with eight bonuses and one stock split. This is apart from regular dividends year on year.

Rs. 7500 invested in 1976 (at Rs.15 a share) would have got 500 shares. And if someone held these shares till date, today the shares would have multiplied to 2,07,360 Shares. At today's market price of Rs.346, the value of these ITC shares is Rs.7,17,46,560. (Rs Seven Crore Seventeen Lakhs). That's close to 10,000 times (9566 times to be precise)! The annual returns work out to 25.75%.

Thought it may not have been possible for everyone to invest in 1976. Even those who invested in Jan 2000 stand to gain phenomenally. 5000 shares bought for Rs.1,15,650, would have multiplied to to 1,50,000 Shares. At todays price of Rs.346, this would be worth Rs.5,19,00,000 (Rs.Five Crore Nineteen Lakhs Only!)

Apart from this, ITC has declared dividend at Rs.8.50 per share (850%). For those who invested in 2000, the dividend works out to Rs.12,75,000 (12.75 Lakhs).

Thought this would look very tempting, the secrete lies in holding this share for long period. Fro instance from 1976 to 2016 or from 2000 to 2016. Anything short of this might not reward the investors.

So stop worrying about stock price post bonus or your missed out to invest in 1976 or 2000. Invest today and stand to gain phenomenally in the decades to come.

Basic Facts about Bonus Shares:

Investing in stock market has two main objectives : Growing your capital and regular income in form of dividend. Growing capital may happen by simple appreciation of share price or by a combination of share price growth and addition of free shares in the form of bonus.

Though many investors get lured by 'FREE' shares, post bonus the share price falls. For instance if the share price is Rs.100 and the company issued 1:1 bonus, then post bonus the number of sharesee increases to 200 and the share price falls to Rs.50. Thus making the total value of investment the same.

Once investors realize this, they feel there is no meaning in investing for the sake of bonus. They feel it makes no economic sense. This could be due to misconception of facts behind Bonus.

Bonus is:

• Non cash transaction. 
• It is issued for free to existing share holders in a ratio like 1:1 or 1:2 etc
• Post bonus, the number of shares increases - thus increasing the liquidity.
• Increase in liquidity coupled with lower share price - makes it affordable for more number of investors to buy these shares. Thus increasing the share holder base.
• More number of share holders results in more public scrutiny and improved price discovery.
• Inspite of any number of bonus shares, the face value of the shares remain constant. Unless the shares are split (when face value of the shares are split), the face value remains constant.
• And if the company maintains constant dividend or improved dividend in percentage terms, then the share holder stands to gain immensely. And the dividend yield ratio increases since the same percentage dividend on reduced share price (post bonus) makes it even more attractive.

But all these factors work only in the long term - atleast in 3 to 5 year term and beyond. Short term investors need to be satisfied with the short term surge in stock price due to bonus announcements.

Heritage Foods:

The Heritage Group was founded in 1992 by Telugu Desam Party leader and current Chief Minister of Andhra Pradesh Shri Chandrababu Naidu, with three-business divisions viz., Dairy, Retail and Agri under its flagship Company Heritage Foods Limited (HFL),

In the year 1994, HFL went to Public Issue to raise resources, which was oversubscribed 54 times and its shares are listed under B1 Category on BSE.

Heritage is among the leading private sector company by sales and volumes in liquid milk, curd, butter , cheese, butter milk and icecreames. Dairy infrastructure includes 26 sales office, 5750 distributors and 1.15Lakh outlets.


The company had a total revenue of Rs.1722 Cr in FY 2014 and Rs. 2073 Cr in FY 2015. It envisions to have a total revenue of Rs.6000 cr by CY 2020.

Business across 5 segments

• Dairy
• Retail
• Agri
• Bakery
• Renewable energy

Dairy contributes 72.6% of revenue and Retail contributes 23%.

Honda Siel Power Products:

• Valued at Rs1354 Cr @ market price of Rs.1335
• Subsidary of Honda Motors Japan.
• Incorporated in India in 1985
• Leader in Portable generators, water pumps and general purpose engines
• Also makes Lawn movers, brush cutter, long tailed and outboard motors, power tillers etc.
• Exports to 35 countries contributes 42% of revenue
• PE ratio is 29.68
• Price to book is 3.93
• Div yield i 0.45
• Zero debt
• MF's hold 2.17% of the company

MINDA Industries:

Minda is involved in manufacturing

• alloy wheels for passenger vehicles
• automotive switches, horns, lightings
• Globally 2nd largest supplier of horns with 25 manufacturing facilities.
• OEM supplier for Maruti, Bajaj auto, Yamaha, Suzuki, Hero motor, Tvs Mottor. New holland, Eicher, M&M, Royal enfield, TAFE, Kawasaki and Hyundai.
• Market cap @ Rs.1064 Cr
• PE is 19.62
• BV is 4.43
• Div yield is 0.59
• Debt equity ratio is 0.80

KNR CONSTRUCTIONS:

It is a popular lower midcap stocks among Mutual funds. 24.23% of the shares are held by muutla funds.

• It provides Engineering, Procurement and Construction (EPC) services
• Involved in Roads and highway projects
• Involved in Irrigation and urban water infra management
• Has laid 5888 km of roads in last 2 decades across 12 states.
• Operates 4 Build-operate-transfer of 778 km roads
• Market cap is Rs.1525 Crores
• Debt equity ratio is 0.85
• PE ratio is 22.7
• Price to Book value is 1.93
• Dividend yield is 0.18

Rs.1 Lakh to Rs.650 Crores in 20 Years : VIJAY KEDIA

Vijay Kedia who turned Rs 1 lakh to 650 crore in 20 years of investments at componding rate of 55% pa.He explained the same in this video (CLICK HERE)
In his talk he said 10 points that have helped him to avoid defeat in the market.

1. Create a fixed income outside the market for your livelihood: Never be dependent on the income from the market.

2. Be informed and read a lot: The market rewards you as per your perception. If you think investing is a gamble, then it is a gamble. If you think it is a business, then it is a business. Read a lot and be a maniac when it comes to reading; it will help you connect the dots.  Warren Buffett once held up stacks of paper and said he read "500 pages like this every day. That's how knowledge builds up, like compound interest."

3.  Invest a part of your savings, not the earnings, into stocks. Also you should only invest a certain amount based on your risk-taking capacity.

4.  Don't leverage: Don't invest from borrowed money.

5. Invest only for five to 10 years; minimum time frame is five years: Rome was not built in a day. It takes time for a story to mature. I always invest in small caps that go on to become mid to large caps.Whenever I bought a small cap, people discouraged me. No one liked the stock. For two years the company went nowhere; after that it gave multibagger returns.

6. Invest only with the best management and let it worry about the company: If you invest with the best management, you don't have to worry. Let management worry because management has its prestige and its name at stake.
Good management in bad business is better than bad management in good business.

7. Your investment belongs to the market and the profits belong to you: As long as you are invested, the profits belong to the market. Don't spend just because the stock has risen because tomorrow stock prices can collapse.

8. Book profits periodically: Invest profits in buying.

9. Don't be happy in an up market, and don't be sad in a down market. He explains how one should avoid regret. He says a stock can go up after you sell it. Don't regret. The stock market is a place of regret. You make money, you regret. You lose money, you regret. You make less money, you regret. That is why it is very important to keep a balanced mind.

10. The stock market is a mind game.

52 Stocks from Small cap and Lower Mid cap space:

Zeroing on potential investment is always a herculean task for investors. Feeling bored by these activities, lot of investors plunge into investing by watching TV anchors or getting influenced by friends etc. But if something goes wrong, it is the investors hard earned money that vanishes. Hence it is better to be safe than to be sorry.

Here is a list of 52 stocks to assist you identify where to invest. Of these 52 stocks, 21 are small cap's (market cap < 1000 Cr) and 31 are lower mid cap's (market cap 1000 Cr to 2000 Cr). There are stocks in which Mutual funds have invested atleast 1% of their AUM. Almost all of them have posted profits in the last financial year.

• Of these 52 stocks
• 6 are Pharma companies
• 5 are Auto Ancillary
• 5 are Electrical equipments
• 4 are Automobiles
• 3 are Chemicals
• Triton valves is the smallest from the list (market cap Rs 89 Cr)
• TVS Srichakra is the largest from the list (market cap Rs.1933 Cr)
• Sagar Cements reported highest Return on equity last year (77.8%)
• Popular stocks among MF's from this list
• KNR constructions : 24.4% held by MF's
• Kirloskar Pneumatics : 18.26%
• Navin Flourine : 17.88%
• APL Apollo Tubes: 16.53%
• Automotive Axles : 15.26%
• Vesuvius India : 15.14%
• Zero debt companies for the past six years from the list:
• Vesuvius India
• Kennametal India
• Voltamp Transformers
• Swaraj Engines
• Goodyear India
• Maharastra scooters
• Elantas Beck India
• Merck
• Honda Siel Power
• Wim Plast
• Kalyani Investment Company
• TATA Sponge Iron

Reference : Capital Market Magazine

Large, Mid and Small cap stocks : Demystified

While investing, many prefer to invest in low prices stocks. This strategy probably gives immense psychological satisfaction as they end up buying shares in HUGE quantity with little investment. More over , it is assumed that the price increase would be more from low price. For instance for Rs.1 to become Rs.2, is preceived as easier than Rs.100 becoming Rs.200 or Rs.1000 becoming Rs.2000. And the reality is many of the small cap stocks are low prices - most of them quoting lesser than their face value. If stocks are not worth even of their face value, then there has to be some serious issue. And there are many small cap stocks quoting in three digit and four digit prices. So let's stop confusing low prices stocks with small cap stocks. 

Stocks are classified based on their Market capitalization which is arrived by multiplying the total number of shares with the current market price. And those stocks with less than Rs.1000 Crore market cap are termed as Small cap stocks. From 1000Cr to 10000 Cr market cap are termed as Midcap stocks and above Rs.10000 Cr market cap are Large cap stocks. In a natural transition, Smallcaps can transform into Midcaps and Midcaps into Largecaps over medium to long term. Hence the growth potential of can be manifold for long term investors. But Smallcap stocks can fail frequently due to various reasons like competition, leverage and lack of brand. 

There are 3041 stocks which have market cap less than Rs.1000 Crores. Of this 527 stocks are trading in three digit prices and 26 companies are trading in four digit prices. Contrary to the belief of investing in low prices small cap stocks, high priced small cap stocks are the ones to watch out for. Perhaps these companies might issue bonus or go in for stock split to increase the number of shares. Though these corporate actions are not certain, there is a higher probability if their balance sheets supports with huge reserves.

So start looking for quality small cap stocks. Probably you may hit a multibagger!