2:1 bonus shares: Multibagger SME IPO turns ₹1.14 lakh into ₹6.48 lakh in seven years

livemint.com:

Bonus shares effect: A long term investors not just gain from stock price appreciation but from other rewards like dividend, bonus shares, stock split, buyback of shares, etc. At one look these rewards that a listed company announces from its capital reserves may not look attractive but in long term these rewards lead to whopping return in one's long term shareholding. Those who believe in examples, they can look at Mitsu Chemplast shares.

The initial public offering (IPO) of this SME stock was offered in August 2016 at ₹95 per equity share. Investors were allowed to apply in lots and one lot of the BSE SME IPO was comprising 1200 company shares. The SME issue listed on BSE SME exchange at ₹96 apiece, delivering a paltry listing gain of Re 1 per share to the allottees.

However, if an investor had believed in its conviction that he or she had developed after scanning the financials of the company before applying for the IPO. The SME stock declared bonus shares in January 2020 in 2:1 ratio. This means, two bonus shares were rewarded for every one stock held by the company shareholder on bonus share record date.

As per the information available on BSE website, Mitsu Chem Plast Ltd traded ex-bonus on 28th January 2020. The board of directors of the company had declared bonus shares in 2:1 ratio. So, if an allottee of the SME IPO had remained invested in the scrip despite muted listing, its shareholding in the company would have tripled after receiving two bonus shares in one's demat account after issuance of bonus shares.