Bonus shares, stock split effect: Multibagger SME IPO turns ₹1.35 lakh into ₹7.80 lakh in 11 years

Multibagger IPO: Vishal Fabrics has made its IPO investors reap hefty profits, thanks to a series of corporate actions, from stock splits to bonus shares.

If an investor had applied for its public offer in 2014 and received allotment, then their initial investment of ₹1.35 lakh would have swelled to ₹7.80 lakh as of today, April 8, garnering multibagger returns.

Wealth Multiplier

Vishal Fabrics' SME IPO, which hit the Indian stock market some 11 years ago, offered retail investors 3,000 shares in one lot at an issue price of ₹45 apiece. This means an investor would have had to invest ₹1,35,000 ( ₹45 X 3,000) for one lot.

While the current price of Vishal Fabrics is ₹28.90 (as of day's high on April 8), the IPO investors have still made a gain of ₹6.45 lakh during this period. This is because the SME stock has split its shares and offered two bonus issues, thereby increasing the number of shares held by an investor without paying any additional cost for the acquisition of these shares – reflecting the benefits of long-term investing.

Corporate Actions

- Stock split

After listing, Vishal Fabrics announced a stock split for the first time in October 2017 in the ratio of 1:2, meaning the company split one equity share of face value of ₹10 into two shares of face value of ₹5. So, an investor holding 3,000 shares (allotted as part of the IPO) would have seen the number of shares rise to 6,000.

- Bonus issue (2020)

Later in 2020, Vishal Fabrics declared a 1:2 bonus issue. In this, the company said it would issue one free share for every two shares held by the investors.

So the IPO investor with 6,000 shares was issued another 3,000 shares at no additional cost, taking the total share count to 9,000 (6,000 + 6000 X 1/2).

Bonus issue (2022)

To reward its shareholders further, the company in 2022 announced another bonus share issue, this time in the ratio of 2:1, meaning that an investor would get two free shares for every one share held by them. So, an IPO investor who now has 9,000 shares would have received two additional shares for free, i.e. 9,000 X 2 = 18,000; taking the total shares held by him to 27,000 (9000 + 18,000 bonus shares).

As of today's high price of ₹28.90, their value comes to Rs 7,80,000 (27,000 X ₹28.90).

Vishal Fabrics Financials

Vishal Fabrics, which manufactures and sells various textile products, has seen a sharp fall in profit over the years, with its bottomline standing at ₹2.13 crore in FY24, less than half of ₹5.28 crore FY23.

The revenue also moderated to ₹145 crore in the last fiscal from ₹154.78 crore on a YoY basis.

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