Following significant market developments, Easy Trip Planners Limited recently saw its shares surge 14% as they traded ex-date for a 1:1 bonus share issue.
This move has attracted attention from investors and market watchers, raising questions about the potential of this travel-focused stock. Let’s break down what happened, why it matters, and whether this is a stock you might consider holding.
What Triggered the Rally?
The recent surge in Easy Trip shares comes as the stock started trading ex-bonus. An ex-date marks the cut-off for eligibility to receive bonus shares—shares issued to existing shareholders at no additional cost. In this case, Easy Trip announced a 1:1 bonus ratio, meaning shareholders will receive one additional share for every share they hold. This corporate action often boosts market confidence, reflecting the company’s financial health and shareholder-friendly approach.
Bonus Shares Funded by Reserves
Easy Trip announced that the bonus shares will be issued using the company’s available reserves as of March 31, 2024. A total of 1,77,20,40,618 shares, each with a face value of ₹1, will be distributed. This issuance will utilize ₹1,772.04 million from the company’s reserves, leaving the reserves at ₹3,973.96 million.
Post-distribution, Easy Trip’s total share capital will rise to ₹3,544.08 million, reflecting its growth and commitment to enhancing shareholder value. This move underscores the company’s confidence in its financial stability and dedication to rewarding investors. Source: Mint
Why Issue Bonus Shares?
Bonus shares are often distributed to reward existing shareholders and improve liquidity. The market price adjusts accordingly by doubling the number of outstanding shares, making the stock more affordable to smaller investors. Easy Trip’s decision aligns with its strategy to attract a broader investor base while showcasing its robust financials.
Since its IPO in 2021, Easy Trip shares have been a standout performer, delivering significant returns to investors. The company’s continued growth and shareholder-focused policies, including regular bonus issues, have positioned it as a compelling pick in the travel services sector.
A Closer Look at Easy Trip’s Performance
With India’s travel industry rebounding strongly post-pandemic, Easy Trip has benefitted from increased demand for travel services and online booking platforms.
The company’s financials remain solid, supported by its asset-light business model and consistent profitability. Strategic partnerships and the expansion of its service offerings have further boosted this performance.
| Market Cap (in ₹ crores as of 29-11-24) | CMP | PE Ratio | ROCE % | Debt / Equity | Dividend yield |
| 6,636 | Rs. 18.7 | 37.7 | 43.4 | 0.0 | 0.28 % |
The gross booking revenue (GBR) for the quarter also stood at ₹20,756 million. GBR from hotel nights surged to ₹2,414 million, reflecting an impressive year-on-year growth of 178.4%, while revenue from other bookings increased by 19.4% to ₹407 million. Source: Mint
What should investors do?
Here are key factors to consider before deciding:
Growth Potential
The Indian travel industry is set to expand rapidly, driven by rising disposable incomes and increasing internet penetration. Easy Trip’s focus on online travel services positions it well to capitalize on this growth.
Valuation
Post-bonus, the adjusted share price often presents a more accessible entry point for retail investors. However, the stock’s rally may have already priced in some of the benefits of the bonus issue. Assessing its valuation compared to peers will help determine if it’s still a good buy.
Risks:
Despite its strong fundamentals, the travel industry is cyclical and sensitive to macroeconomic factors like inflation and geopolitical instability. Investors should be prepared for potential volatility.
Long-Term Perspective
If you believe in the long-term growth of India’s travel sector and Easy Trip’s leadership, this stock could be a worthy addition to your portfolio.
How to Benefit from Bonus Shares
If you’re an Easy Trip shareholder, the bonus shares will be credited to your demat account shortly after the record date. Monitoring the adjusted share price to assess its impact on your portfolio is essential. Remember, while bonus shares increase the number of shares you own, the overall value of your investment remains the same initially as the market adjusts the stock price proportionally.
Conclusion
The bonus issue and recent rally underline Easy Trip’s appeal to investors, but deciding to buy or hold the stock requires careful consideration. For current shareholders, the 1:1 bonus is a win-win. For prospective investors, analyzing the stock’s fundamentals, sector dynamics, and valuation is crucial before taking deciding.
As always, align your investment decisions with your financial goals and risk tolerance. A diversified approach will help mitigate potential downsides.
Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
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FAQ
What are Bonus Shares?
Bonus shares are additional shares issued by a company to its existing shareholders for free. They are issued in proportion to the number of shares already held by the shareholder. For example, in a 1:1 bonus share ratio, a shareholder with 10 shares will receive an additional 10 shares.
Why do Companies Issue Bonus Shares?
Companies issue bonus shares for various reasons. One key purpose is to improve liquidity by increasing the number of shares, which enhances trading activity. Additionally, issuing bonus shares can make the stock more affordable by reducing its price, thereby attracting more retail investors. It is also a useful tool for capital restructuring, helping companies reorganize their financial structure effectively.
How do Bonus Shares Impact Stock Price?
In most cases, bonus shares do not directly impact the intrinsic value of the company. However, they can lead to a short-term rally in the stock price due to increased liquidity and investor interest. In the case of Easy Trip, the 1:1 bonus share announcement fueled a 14% rally in the stock price.
Should I Buy Easy Trip Shares After the Bonus Issue?
The decision to buy Easy Trip shares after the bonus issue depends on various factors, including the company’s future growth prospects, financial performance, and industry trends. It’s important to conduct thorough research or consult with a financial advisor before making any investment decisions.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
