Canara Bank shares rally 5% after PSU stock split. Key details

Canara Bank Ltd climbed 5 per cent in Wednesday’s trade, as the scrip got split into shares with lower face value. Today was the ex-date and the record date for the Canara Bank stock split. The fully paid up shares of Canara Bank, having face value of Rs 10 each, have been sub-divided into five fully paid up shares of Canara Bank with face value of Rs 2 each. They have thus turned ex-date for the corporate action.

Adjusting for the split, the stock stood at Rs 118.40 on BSE, up 4.54 per cent. The move is seen boosting liquidity on the counter, as it made it affordable for retail investors to buy Canara Bank shares.

It is also seen broadening the retail investors base. A total of 7,39,996 retail investors (individuals with up to Rs 2 lakh shares) owned 6 per cent stake in the bank, while 337 HNIs including Rekha Rakesh Jhunjhuwala (1.45 per cent stake) owned a combined 4.65 per cent stake in the PSU lender as of March 31.

The bank now has 907,06,51,260 shares against 181,41,30,252 earlier. In a stock split, shares that are already owned are split into stocks with smaller face values. There is no impact on share capital as it is different from bonus share, where additional shares are given to existing shareholders based on number of shares owned.

Unlike stock split, bonus shares are announced to distribute gains of accumulated earnings without paying cash to the shareholders. They reduces reserves and money is moved to share capital as new shares are issued.

With the bank consistently maintaining stable net interest margin, ongoing moderation in credit costs and sustained return on asset of 1 per cent for several quarters, JM Financial expects Canara Bank’s rerating to continue going ahead.