Varun Beverages announces record date for 2:5 stock split; shares rise 2%

Recently, Varun Beverages, a key bottling franchise partner of PepsiCo, made headlines with its decision to split its stock. This move has not only garnered attention from investors but also led to a noticeable increase in the company’s share price. If you're looking to buy shares online, understanding the implications of such announcements is important.

Understanding the stock split announcement

On a significant Monday, Varun Beverages revealed that September 12, 2024, would be the record date for its much-anticipated 2:5 stock split. For investors who buy shares online, this date is significant as it determines who is eligible for the split's benefits. Essentially, a stock split divides the company’s existing shares into more shares, which, in this case, is a 2:5 ratio. This means that for every 5 shares held by an investor, they will receive 2 additional shares.

Following the news, Varun Beverages’ shares rose 2%, reaching a day’s high of Rs 1,533.50. Such movements are not uncommon when companies announce stock splits, as they can make the shares more affordable and attractive to a broader base of investors.

The mechanics of the stock split

The existing equity shares, which had a face value of Rs 5 each, will now be subdivided into shares with a face value of Rs 2 each. This restructuring does not change the overall value of an investor’s holdings. Still, it increases the number of shares they own, making the shares more liquid and accessible to a larger pool of investors who buy shares online.

Before this, Varun Beverages had already split its shares once in June 2023, when the face value was reduced from Rs 10 to Rs 5. This ongoing strategy of splitting shares reflects the company’s aim to enhance liquidity and attract more retail investors, which is a common practice among companies experiencing rapid growth and high share prices.

Financial performance and market reaction

The stock split announcement follows Varun Beverages' strong financial performance. For the second quarter ending June 2024, the company got a profit after tax (PAT) of Rs 1,261.83 crore, marking a significant 26% year-over-year (YoY) increase. Additionally, the company’s revenue grew by 28% YoY to Rs 7,196.86 crore, up from Rs 5,611.40 crore in the same quarter of the previous year.

These impressive financial results have led to positive market sentiment around Varun Beverages. Over the last year, the shares of Varun Beverages have advanced by 68%, with a 23% rise on a year-to-date (YTD) basis. For investors who regularly buy shares online, these figures are a testament to the company’s robust performance and potential for future growth.

Key takeaways for investors

1. Significance of the stock split: A stock split, such as the one announced by Varun Beverages, is a strategic move aimed at increasing the number of shares available in the market, making them more affordable and potentially more attractive to retail investors.
2. Impact on share price: Following the announcement, Varun Beverages’ shares experienced a 2% increase, which highlights how such news can positively influence market sentiment and investor confidence.
3. Financial strength: Varun Beverages has shown strong financial growth, with significant increases in both profit and revenue. This performance is a key factor in the positive movement of its share price and the success of its stock split strategy.
4. Importance of the record date: The record date of September 12, 2024, is crucial for investors who want to benefit from the stock split. Those who hold shares as of this date will be eligible for the additional shares resulting from the split.
5. Strategy for buying shares online: For investors considering buying shares online, understanding the implications of stock splits and monitoring the financial health of a company are essential steps in making informed investment decisions.