Wipro shares show a 50% fall on some mobile apps due to the company’s 1:1 bonus issue. Learn how bonus issues impact share prices and why trading apps may show unadjusted prices.
Wipro Ltd shares have been making headlines due to a significant 50% fall displayed on some mobile trading apps, but the cause behind this sharp drop lies in the company’s recent bonus issue. Today, Wipro shares turned ex-bonus in the ratio of 1:1. While the stock adjusted for the bonus issue opened at Rs 295.50 on the Bombay Stock Exchange (BSE), it showed a steep 49.45% decline when compared to yesterday’s unadjusted closing price of Rs 584.55.
The reason behind this discrepancy is that certain trading apps are still reflecting the unadjusted share price of Wipro from the previous day, which is misleading to some investors, suggesting a massive drop. It is important to note that this fall is not a real loss in value, but rather an adjustment related to the bonus issue.
What is a Bonus Issue and Why Does it Affect Share Price?
A bonus issue is a corporate action where a company issues additional shares to its existing shareholders, usually from its free reserves. In Wipro’s case, the bonus shares were issued in a 1:1 ratio, meaning that for every share an investor holds, they will receive one additional share, fully paid-up. The purpose of this is to increase the liquidity of the stock by increasing the number of shares in circulation, without raising new capital.
However, while the bonus shares increase the number of outstanding shares, they also proportionally reduce the share price. In other words, the total value of an investor’s holdings does not change, but the price per share drops to accommodate the new shares issued.
Details of Wipro’s Bonus Issue
The record date for Wipro’s bonus issue was set for December 2, 2024. As per this action, Wipro will determine eligible shareholders for the bonus issue, and the shares will be credited soon thereafter. Post the bonus issue, Wipro’s paid-up equity share capital is expected to rise to approximately Rs 20,925,943,128, with 10,462,971,564 equity shares of Rs 2 each.
Wipro’s bonus issue marks its first since 2019, where the company issued bonus shares in a 1:3 ratio. Prior to that, the company had declared bonus shares in various ratios, including 1:1 in 2017 and 2:3 in 2010. The bonus issue is part of the company’s ongoing efforts to maintain liquidity and shareholder satisfaction.
Why the Drop Isn’t Real
The perceived 50% drop on some mobile trading apps is largely due to the incorrect display of unadjusted share prices. These platforms are showing the previous day’s closing price of Rs 584.55 instead of the adjusted price post-bonus issue. Therefore, while the stock appears to have fallen sharply, this is merely a reflection of the bonus shares being issued and should not be confused with an actual loss in value for investors.
Wipro’s Recent Performance and Outlook
While Wipro’s demand environment has been challenging recently, with client-specific issues affecting performance, there are signs of improvement, particularly in the BFSI (Banking, Financial Services, and Insurance) vertical. Analysts remain optimistic about Wipro’s potential, citing a favorable portfolio, the appointment of new CEO Srini Pallia, and its relatively inexpensive valuations, which together create an attractive risk-reward profile.
In addition to the bonus issue, Wipro had also announced a share buyback plan last year, further boosting investor confidence in the company’s future prospects.
Conclusion
Investors should not be alarmed by the 50% fall in Wipro’s share price shown on certain mobile apps, as this is due to the adjustment related to the bonus issue. The company’s fundamentals remain strong, and with the positive signs in key sectors, Wipro is positioning itself for future growth. As always, investors are advised to keep track of the adjusted prices and monitor developments closely.
