2:1 bonus shares, 1:10 stock split: Multibagger SME IPO turns ₹1.36 lakh of allottees to ₹4.68 lakh in 6 years
Multibagger IPO: For a smart equity investor, the investment strategy for an initial public offering (IPO) is not much different from the stock investment strategy because investing in an IPO is like investing in a stock. So, one should try and hold the stock after share allocation as long as one can. This enables an investor to get a compounding benefit as one gets income on the income earned on one's investment amount.
Apart from this, a long-term investor enjoys the benefit of various rewards that a listed company announces post-listing in the form of dividends, bonus shares, buyback of shares, stock split, etc. To understand how a long-term view on an IPO may fetch profit for an allottee, one needs to look at the Sarveshwar Foods IPO. The NSE SME IPO was launched in March 2018 at a price band of ₹83 to ₹85 apiece.
The SME stock listed on the NSE SME Emerge platform at a discount of ₹2 per share against the upper price band and went on to further lose its sheen on the listing date. However, if an investor had remained invested in the stock post-weak listing, one would have benefited from the 2:1 bonus shares and 1:10 stock split that the company announced in September 2023. On 15th September 2023, Sarveshwar Foods share price traded ex-bonus and ex-split to ascertain the eligible shareholders for issuance of 2:1 bonus shares and 1:10 stock split benefit.
If a share allottee had remained invested in the SME stock to date, its shareholding would have surged 30 times (thrice due to the issuance of two bonus shares for each share held on 15th September 2023 and the subdivision of one share into 10 shares). As Sarveshwar Foods IPO lot size comprised 1600 company shares. Shareholding of an allottee would have surged to
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