Easy Trip Shares bonus issuance is one among various corporate events that may have a good deal of influence on the shares’ price of a company when done. Recently, the leading Indian online travel agency Easy Trip Planners (EaseMyTrip) was much in the news when its stock price increased by nearly 14% while trading during the morning hours on Friday, November 29, 2024, when it became ex-bonus for the equity. The stock surged after the issuance of 1:1 bonus shares declared by the company. But what does this mean for investors, and why did the stock see such a significant jump? In this blog, we’ll explore the details of the bonus shares announcement, its implications for Easy Trip, and how investors can navigate such events.
What Are Bonus Shares?
Before exploring the bonus share issue of Easy Trip, it is crucial to know what bonus shares are and how they benefit the company as well as its shareholders.
Bonus shares are additional shares given by a company to its current shareholders without any additional cost to the shareholders. Bonus shares are mainly issued from the retained earnings of the company or from their reserves. Bonus shares do not incur any cash outlay for the company or its investors. They are a method the companies use to reward their shareholders, usually when they experience strong financial performance or want to retain earnings rather than pay dividends.
Bonus shares are commonly issued in a ratio, of 1:1, meaning one bonus share for every existing one or 2:1 or two bonus shares for one existing share. This increases the total number of shares issued and outstanding, but there is no increase in an investor’s holding value since each investor’s percentage ownership after issuance typically declines due to the reduced value per share. However, the bonus shares issue does have a positive effect on investor sentiment and increases demand for its stock; hence, the stock price increases, as seen with Easy Trip.
Easy Trip’s Bonus Share Issue of 1:1- Details and Impact
Easy Trip announced on November 29, 2024, that its stock went ex-bonus. Thus, investors who purchased the share from and after this date would not have a chance to receive the bonus shares that will be issued.
Shares immediately surged by nearly 14% as the bonus share issue details of Easy Trip were revealed.
The company’s board of directors approved the issuance of bonus shares in the ratio 1:1 at their board meeting held on 14 October 2024. This means that for every equity share fully paid upheld, every investor will receive an equivalent number of bonus shares. It is issued from the reserves existing as of 31 March 2024.
According to the company’s exchange filing, the total number of bonus shares to be issued is 177,20,40,618 shares with a face value of ₹1 each. The total cost of issuing these shares is ₹1,772.04 million, which will be financed using the company’s available reserves, which stand at ₹3,973.96 million. After issuing these shares, the total share capital will be at ₹3,544.08 million.
This is the third time that Easy Trip has been rewarding its shareholders with bonus shares. Previously, it had issued a 1:1 bonus in February 2022 and a 3:1 bonus in November 2022.
Investor Reaction and Stock Performance (Easy Trip)
As expected, the 1:1 bonus share issue announcement increased the price of the shares. On 29 November, Easy Trip shares opened on the BSE at ₹648.90, 3.4% lower than the closing of the previous day at ₹671.75. Then the price moved up again and went all the way up to ₹88.10, with a 14% gain, while the stock became ex-bonus.
The rally continued in the market, reflecting positive investor sentiment around the company’s recent earnings and its ability to deliver consistent results. The bonus share issue, which effectively gives shareholders more equity in the company, is a clear indication of Easy Trip’s commitment to rewarding its investors and its strong financial position.
The Importance of Bonus Shares for Investors
Bonus shares can be attractive to investors, especially when the financial performance of the company is justifiable for issuing bonus shares. Some of the advantages of bonus shares are as follows:
1. Increased Shareholding:
Bonus shares increase the number of shares an investor owns without requiring additional investment. It can be regarded as ‘free’ additional shares that enhance the investor’s stake in the company.
2. Increased Liquidity:
The issuance of more shares increases the overall liquidity of their stock, making it relatively easy for investors to buy and sell shares in the market.
Positive Signal from the Company: Bonus share issuance is quite often considered a positive signal sent by the company. It appears that the company is financially healthy and hence can reward its shareholders in this manner.
Psychological Impact:
Bonus shares make the investors feel rewarded, which makes many of them want the stock even more. It can be a positive factor in increasing the demand for the stock and boosting investor sentiment.
Financial Performance of the Company and Q2FY25 Performance
Easy Trip has been performing well financially. It has been one of the factors that have made the company issue bonus shares. The company has posted decent numbers for the September quarter, Q2FY25.
1. Revenue Growth:
The revenues from operations for the company increased by 21% year-on-year, reaching ₹1,447 million in Q2FY25. This shows that Easy Trip is still capturing more of the market share in the competitive travel sector.
2. EBITDA and Profit Margins:
The company’s EBITDA at ₹423 million and the EBITDA margin stood at 28.2%. This reflects good cost management and a robust bottom line.
3. Profit After Tax:
PAT stood at ₹259 million while providing a 17.3% margin. This is healthy and speaks well for the operations of the company.
4. Gross Booking Revenue (GBR):
Gross booking revenue for Q2FY25 was ₹20,756 million and showed growth of 178.4% y-o-y in GBR from hotel nights, which proves the increasing footprint of the company in the hotel booking space. Income generated from other bookings also grew by 19.4%. The company’s position in online travel has become stronger.
Why did Easy Trip issue Bonus Share?
Issuing bonus shares is one strategy which a firm might take when wanting to reward all the existing shareholders without causing depletion in the cash reserve it has. The fact that Easy Trip had undertaken this exercise may imply good financial strength for the company, distributing its earnings to shareholders as meaningful.
Moreover, Easy Trip could have decided to give bonus shares as part of its strategy to sustain investor interest and improve market sentiment, especially after the good Q2FY25 financial performance. In doing so, it is communicating to the market that it has confidence in its long-term growth prospects and is ready to share its success with shareholders.
Future Outlook for Easy Trip
With a history of successful growth and a focus on innovation, Easy Trip seems poised to stay at the forefront of the steadily rising demand for travel-related services in India and elsewhere in the world. The good results in Q2 and the company’s ability to deliver good growth in its main business categories like hotel booking and all travel services will continue to bring a competitive edge.
Moreover, the decision to issue bonus shares indicates a positive future and rewards the investors for loyalty. As the travel and tourism sector continues to recover, Easy Trip could see even stronger growth in the coming quarters.
Conclusion: What Does This Mean for Investors?
Undoubtedly, the 1:1 bonus share issue by Easy Trip has certainly created investor interest and the stock jumped by 14% following the announcement. For the existing investors, bonus shares present an opportunity to boost their holding without further investment. For new investors, with a sound financial performance and bonus shares, Easy Trip presents an attractive proposition in the travel and tourism space.
As Easy Trip continues to expand its operations and capture more market share, it will remain one of the bigger players in the online travel business in India. For long-term growth, investors may find Easy Trip a good investment, especially since travel continues to show pace in recovering from the pandemic.
Overall, the recent announcement of 1:1 bonus shares by Easy Trip is a positive sign not only for the company but also for its shareholders, and the recent surge in stock underlines the investor’s confidence in the company’s future prospects.
0 Comments