The board of Indian Railway Catering and Tourism Corporation (IRCTC) on Thursday announced splitting of the company’s one equity share into five. This means that one share of ₹10 will be split into five equity shares with a face value of ₹2 each.
The move will be subjected to approval from the railways ministry and other shareholders, IRCTC said.
“Recommended the proposal for sub-division of Company’s one (1) equity share of face value of ₹10/- each into five (5) equity shares of face value of ₹2- each, subject to the approval of Ministry of Railways, shareholders and other approvals as may be required,” IRCTC said in a release.
What is stock split?
This is a move to issue more shares of stocks to a company’s current shareholders without diluting the value of their stocks. A stock split increases the number of shares and lowers the individual value of each share.
The market capitalisation of the company, however, remains unaffected.
Why do companies opt for stock split?
The boards of many companies decide to split the stock, either to achieve a target or create more liquidity by making the price of the stock more attractive for a larger number of people, especially small investors.
The most common split ratios are 2-for-1 or 3-for-1, which means the stockholders will have two or three shares – as the split maybe – for every share held.
What about IRCTC’s split?
In IRCTC’s cases, every one share held by a shareholder will become five shares. According to Livemint, post-split the number of shares will increase to 125,00,00,000 from 25,00,00,000.
IRCTC expects the stock split process to be completed within three months after receiving approval from government of India, Livemint reported.
The board meeting of IRCTC commenced at 12:30pm and concluded at 2pm, the company said in the release.
Apart from stock split, the IRCTC board also approved the unaudited financial results for the quarter which ended on June 30.