RITES Share Price Adjustments Due to Bonus Issue

On Friday, RITES shares experienced a noticeable fluctuation in their market price, primarily due to the stock turning ex-date for a bonus issue. Initially, the shares opened at Rs 362.95, quickly dipping to a low of Rs 354.55, signifying a 48% drop from the previous day’s closing price of Rs 682.45. However, this apparent decline is attributed to the share price adjustment following the bonus issue. On an adjusted basis, RITES shares actually rose by 8%, reaching a high of Rs 362.45 on the Bombay Stock Exchange.

The occurrence of a bonus issue increases the number of outstanding equity shares, which consequently reduces the share price proportionately. While this can enhance the liquidity of the stock, it may also lower the company’s free reserves and surplus. Such corporate actions are common and often lead to price adjustments, as observed with other companies like The Phoenix Mills Ltd and Axita Cotton, which also displayed significant price movements following similar corporate decisions.

In the case of RITES, the company offered a bonus issue at a 1:1 ratio, meaning shareholders would receive one additional share for every share they currently hold. The eligibility for receiving these bonus shares was determined on the same day, which marked the record date for the corporate action. Additionally, RITES went ex-dividend, announcing a final dividend of Rs 5 per share for the fiscal year 2024. This dividend is scheduled to be distributed on October 12, 2024.

RITES is a multidisciplinary engineering and consultancy organization that plays a significant role in transport infrastructure, particularly in the railway sector. It provides an extensive range of services from concept to commissioning related to transport infrastructure. Recently, the company has been involved in various developments, including a memorandum of understanding with NBCC (India) Ltd to expand its consultancy offerings and a successful bid for providing consultancy services for infrastructure projects in Uttar Pradesh.