January 5, 2024
In a strategic move aimed at making its shares more accessible to a broader investor base, Nestle India, once among the most expensive stocks in the country, underwent a 1:10 stock split on January 5. This decision resulted in a significant drop in share prices by 2%, causing a shift in the company's market dynamics.
Background and Opening Performance
Prior to the stock split, Nestle India stood as the sixth most expensive stock on the Indian market. The company's shares, which were once priced at ₹27,150, experienced a substantial reduction to ₹2,660 post the 1:10 stock split. This decision, approved by the company's board in October 2023, marked Nestle's first-ever stock split.
Mechanism of the Split
The 1:10 stock split translates to one share of Nestle, with a face value of ₹10, being divided into 10 shares, each with a face value of Re 1. As a result, the share price also adjusted proportionally, making it one-tenth of its pre-split value.
Market Reaction and Trading
On the day of the stock split, Nestle India commenced trading at ₹2,749 per share. However, by 9:20 am, the stock had dipped by 1.88%, trading at ₹2,660.65 on the National Stock Exchange. The move was anticipated to attract more retail investors by offering a lower entry point.
Record Date and Shareholder Entitlement
The record date for the entitlement of the split shares was set on Friday, marking the culmination of the sub-division/split of existing equity shares. Shareholders with their names on the Nestle India list by the end of that day are entitled to receive ten times the shares they currently hold.
Motivation Behind the Split
The primary motivation behind this strategic move was to enhance the affordability of Nestle India's shares, particularly for smaller investors. By reducing the share price to a fraction of its previous value, the company aims to attract a more diverse investor base, ultimately boosting liquidity at the counter.
Future Implications
As Nestle India takes this step towards greater accessibility, it will be interesting to observe how the company's stock performs in the post-split landscape. The move is expected to have a positive impact on the company's investor profile, potentially diversifying its shareholder base and fostering increased market participation.
In conclusion, Nestle India's 1:10 stock split signals a deliberate shift towards inclusivity in the stock market, aligning with the company's efforts to make its shares more accessible and appealing to a wider array of investors.
Post a Comment