Kitex Garments hits 5% upper circuit as board to consider bonus issue

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Kitex Garments shares were locked in a 5 per cent upper circuit at Rs 637.15 a piece on the BSE after the company on Monday announced that its board of directors will soon mull on issuance of bonus shares.

 

“We hereby inform you that a meeting of the Board of Directors of the Company is scheduled to be held on Friday, November 22, 2024 to consider inter alia, the proposal for declaration and recommendation of Bonus Equity Shares subject to approval of shareholders of the company,” the company said in an exchange filing. 

What is a bonus issue?

A bonus issue of shares involves distributing additional shares to existing stockholders. While this increases a company’s share capital, it does not affect its market capitalisation.  

 

Bonus shares are typically funded through a company’s earnings or share reserves. Since they are issued in a fixed ratio, bonus shares do not dilute shareholders' equity, maintaining each shareholder’s relative ownership.  

 

Companies may issue bonus shares to make their stock more appealing to retail investors, provide an alternative to cash dividends, or signal strong financial health. However, a potential drawback of bonus issues is the opportunity cost of using earnings that could have been allocated to other purposes.

Kitex Garments bonus issue history

In 2017, Kitex Garments announced a 2:5 bonus issue on April 28, 2017. The ex-bonus date was set for June 22, 2017, while the record date for the bonus issue was June 23, 2017.

 

Kitex Garments is an Indian apparel manufacturer and exporter, specialising in knitted garments for infants and children.

Kitex Garments share price history

The company’s stock has underperformed the market year to date as it has fallen 2.4 per cent, while slipping 9.7 per cent in the last one year. In comparison BSE Sensex has risen 8.2 per cent year to date and 18.8 per cent in a year. 

 

The company has a total market capitalisation of Rs 16,345 crore. Kitex Garments shares are trading at a price to earnings multiple of 54.60 times and at an earning per share of Rs 9.74.