Kolkata: How often do you see the following data in any stock counter? Just after midday on Friday, October 31, the Fineotex Chemical stock was trading at Rs 29.83, up Rs 27.34 (or 1,099.92%). The stock gained 18.72% in the past one week and 10.48% in the past three months. But it declined 22% in the past one year. The Fineotex Chemical stock fell, all on a sudden, by up to 90% on Friday, triggering panic among investors.
Analysts said the dramatic fall was not attributable to any trading weakness. However, it was on account of adjustment of bonus issue and stock split. The stock closed at Rs 248.60 in the previous session and opened at Rs 25.55 today. This triggered a panic among investors who misconstrued that the stock has crashed. One of the investors in this stock is ace investor Ashish Kacholia. He holds 2.62% stake in the company.
Split and bonus
Fineotex Chemical is based in Mumbai. The company manufactures specialty performance chemicals and enzymes for various industries. The products are especially made for the consumption in textiles industries and home care, hygiene, oil and gas, water treatment, construction and paints.
The management of Fineotex Chemical were adjusted for a split and a bonus issue in the ratio 4:1. It indicates that investors will get four shares for every one share held. Besides, after the stock split, one share will now be divided into 10 shares. These actions are always done with a view to increasing the liquidity and market access of a stock and this is no exception. Post adjustment, the stock rose to the extent indicated above.
Why the confusion?
The primary cause of the confusion among investors was the fact that many brokerage apps and trading platforms were showing the unadjusted price. It led to the incorrect impression that the stock crashed 90%, though in reality, the stock price was adjusted to reflect the new capital structure.
The management has said that their measure will raise retail investor participation. Also it will make the stock cheaper and more liquid. One has to keep in mind that a bonus issue and a stock split are completely different things. A bonus issue consist of a company issuing additional shares to existing investors, which is done from stored profits. But a stock split consists in dividing a share into smaller shares which reduces their face value.
At the end of FY25, the company had free reserves of Rs 415.72 crore and a security premium account of Rs 189.48 crore. The bonus issue was done utilising these. he management plans to complete the bonus and stock split process November this year. The company also reported revenue of Rs 146.22 crore, PAT of Rs 24.81 crore in Q1 FY26.
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