CDSL Shares Witness Significant Correction as Stock Trades Ex-Bonus; Prices Adjust Following 1:1 Bonus Issue

Shares of Central Depository Services (India) Ltd (CDSL) experienced a sharp correction today, reflecting the impact of its recent bonus issue. The stock, which closed at ₹2,898.10 yesterday, opened at ₹1,500 today on the National Stock Exchange (NSE), marking a significant drop of 48.24%. This drastic reduction in share price is a result of the stock trading ex-bonus in a 1:1 ratio.

Following this adjustment, CDSL’s stock price quickly rebounded, rising over 6% to reach a 52-week high of ₹1,559 on the NSE. Despite the price halving due to the bonus issue, the stock’s performance post-adjustment shows resilience, with an overall gain of over 6%.

The bonus issue, which took effect today, means that shareholders will receive one additional share for every share they already hold as of the record date, which was fixed for August 24. As a result, the total number of CDSL shares available in the market has doubled, leading to a significant drop in share price. However, it’s important to note that the market capitalization of CDSL remains unaffected by this adjustment.

Milestone for CDSL

The decision to issue bonus shares marks a milestone for CDSL, as it is the first such issue announced by the company’s board, which was declared in July 2024. According to the company’s announcement, CDSL will issue 10.45 crore equity shares with a face value of ₹10 each as bonus shares, amounting to a total issuance of ₹104.5 crore. These bonus shares will be issued through the capitalization of free reserves, including general reserves and retained earnings, pending shareholder approval.

The bonus issue effectively doubles the share capital of CDSL, bringing it to ₹209 crore. In a regulatory filing, CDSL stated, “With reference to the captioned subject and our earlier intimation dated July 02, 2024, and pursuant to the provisions of Regulation 42 of the SEBI Listing Regulations, we wish to inform that the Company has fixed the ‘Record Date’ as Saturday, August 24, 2024.”

During today’s trading session, a significant volume of CDSL shares changed hands, with 44.85 lakh shares traded, resulting in a turnover of ₹679.25 crore. The stock has a beta value of 0.9, indicating relatively low volatility over the past year.

From a technical perspective, the relative strength index (RSI) of CDSL stands at 75.2, signaling that the stock is currently in overbought territory on the charts. This could suggest a potential pullback or continued upward momentum depending on market conditions.

CDSL committed to issuing the bonus shares

CDSL has committed to issuing the bonus shares within two months from the date of board approval, meaning the issuance will occur on or before September 1, 2024. In addition to approving the bonus issue, the board also sanctioned an increase in the company’s authorized share capital. The authorized share capital will rise from ₹150 crore, divided into 15 crore equity shares of ₹10 each, to ₹300 crore, divided into 30 crore equity shares of ₹10 each.

This bonus issue comes on the back of a strong financial performance by CDSL in the first quarter of the fiscal year 2024-25. The company reported an impressive 82% increase in net profit for the quarter ended June 2024, with profits climbing to ₹134.20 crore, up from ₹73.57 crore in the same quarter of the previous year. Revenue for Q1 surged by 72% to ₹257.38 crore, compared to ₹149.68 crore in the corresponding quarter last year.

Central Depository Services (India) Ltd, a SEBI-registered depository, was established to provide a reliable and secure depository service at an affordable cost to all market participants. The company’s recent financial success and the strategic decision to issue bonus shares demonstrate its commitment to enhancing shareholder value and strengthening its market position.