Godawari Power Rallies 5% After Board Approves Stock Split, Bonus Issue

Godawari Power Rallies 5% After Board Approves Stock Split, Bonus Issue

Godawari Power and Ispat shares were locked in 5% upper circuit at Rs 1,269.90.

Shares of steel maker Godawari Power and Ispat were locked in a 5 per cent upper circuit at Rs 1,269.90 after the board of directors of the company approved stock split in the ratio of 1:2 and bonus issue of shares. "The board approved the proposal for sub-division of equity share of face value of Rs 10 each of the company into two equity shares of Rs 5 each, subject to approval of the shareholders of the company," Godawari Power and Ispat said in a stock exchange filing. (Track Godawari Power stock price here)

Godawari Power said that the rationale behind the stock split is to improve the liquidity of the company's share on the stock market and also facilitate small investors to deal in the company's shares.

A company's authorised share capital remains the same in a stock-split, but the market price declines in proportion to the split ratio and this results in a greater number of shares available in the secondary market. The reduction of the market price and increase in liquidity makes the shares affordable to retail buyers, analysts said.

The stock split will take two-three months to come into effect including the time required for seeking approval of the shareholders, Godawari Power added.

In addition to stock split, Godawari Power's board also approved issuing bonus shares to shareholders in order to improve liquidity in shares of the company and for larger participation in equity shares by public shareholders.

The bonus issue has been approved in ratio of one equity share of Rs 5 each as bonus for every one equity share of Rs 5.

As of 12:14 pm, there were as many as 47,896 pending buy orders for Godawari Power shares while there were no sellers on the exchange, data from BSE showed.