The Actual Reason Behind The NSE 4:1 Bonus Share Announcement

The National Stock Exchange(NSE) is on a skyrocketing growth trajectory. After the recent yearly results which give positive growth, the board has recommended a bonus issue of 4:1. Not just this, the exchange also recommended giving a dividend of Rs 90 per share to all its shareholders. NSE declared the same in announcing Q4 results for FY 23-24.

Bonus share calculation

Bonus shares are usually issued in a specified ratio. Here 4:1 means NSE will give 4 new shares for every 1 share held.

When will be the bonus shares and dividend given?

The company will issue the bonus shares post-approval in the shareholder’s meeting and after SEBI approves. The company stated that they have yet to finalize the record date for the issue of bonus shares.

NSE’s dividend of Rs 90 per share, is subject to shareholder approval in the annual general meeting of NSE, reflecting the company's commitment to all its stakeholders. This significant dividend paid out, if approved, will be distributed within 30 days after approval in the shareholders meeting.

What made the NSE recommend the bonus issue?

NSE’s announcement of bonus shares coincided with the announcement of their results for FY 23-24. The possible reasons for the bonus issue can be:

1. Capitalisation of reserves:- The NSE had a 20% YoY increase in consolidated profits for FY 23-24. This issue may allow NSE to capitalize on their existing earnings and convert their reserves into capital.

2. Increase in shareholder liquidity:- Bonus shares increase the ability of existing shareholders to sell more in the open market as now they will own 25% more shares than pre-bonus. Thereby increasing the liquidity in the unlisted share market.

3. Encouraging more retail participation: With the bonus issue, the excess supply of NSE shares will decrease the NSE Share price thereby diversifying the stock base and encouraging more participation.

All these reasons underline the exchange’s strong financial performance.

How did the NSE financials perform?

Some key highlights from NSE’s FY 23-24 Q4 results-

• Consolidated Q4 operating revenue is up by 34% YoY to Rs.4,625 crores.
• Standalone Q4 operating revenue is up by 25% YoY to Rs.4,123 crores
• Consolidated Q4 profit up by 20% YoY at Rs.2,488 crores.
• Standalone Q4 profit increased by 3% YoY at Rs.1,856 crores.

If we take a look at the FY 23-24 yearly results-

• Total revenue grew by 24% YoY to Rs.14,717 crore in FY 24 from Rs.11,859 crore in PY.

• Operating revenue grew 21% YoY to Rs.13,511 crore in FY 24 from Rs.11,181 crore in PY.

• Total Expenses grew to Rs.6,139 crore in FY24 from Rs Rs.3,240 crore in the PY.

While it may appear that NSE’s Total Expenditure to Total Percentage increased significantly, the major part of this increase was the additional contribution to Core SGF done by every clearing corporation SEBI. The Earnings Per Share (EPS) has increased from Rs 148.58 per share to Rs 167.79 leading to an increase in shareholder wealth.

Some other important indicators

NSE’s trading activity has increased as the average daily traded volume (ADTV) jumped by 127 % in YoY for the Q4 of FY 23-24. While the ADTV for equity futures increased by 60% to 1.79 lakh crore trades, the equity options (premium value) ADTVs jumped 27 percent to Rs 75,572 crore in Q4FY24.

NSE also contributed Rs.43,514 crores to the exchequer in the FY24 of which STT/CTT comprised Rs.34,381 crores, Income tax of Rs.3,275 crores, Stamp duty of Rs.2,833 crores, GST of Rs.1,868 crores and SEBI charges of Rs.1,157 crores.

How can you buy and sell NSE shares?

The nse stock price has been skyrocketing since last year from Rs 3600 to Rs 4800 per share. This surge comes near the announcement of Financial results for FY 23-24, which led to an increase in trading activity of the share. The Average daily volumes and healthy financials suggest a strong positive sentiment in the eyes of investors.

Unlike the Bombay Stock Exchange(BSE) and Multi Commodity Exchange (MCX), NSE is an unlisted share in India. But you can buy and sell NSE shares in the unlisted market.

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