Financial Management & Corporate Finance Case Study

Bonus Issue by Indian Energy Exchange

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Abstract:
In 2007, the Government of India (GoI) established the Indian Energy Exchange Limited (IEX), the country’s power trading platform, with the aim of providing a continuous flow of electricity to the Indian power market. Since 2008, the company had served as an electronic platform, enabling power traders (like electricity corporations, state electricity boards, and power-producing companies) to trade on energy-related contracts. On October 23, 2017, IEX was listed in the exchanges at a price of Rs. 1,629.17 per share. On September 5, 2018, IEX showed an upward momentum and a growth of 9.2% to reach Rs. 1,780. Observing the growth in net profit and share price, the board of IEX decided to increase its authorized share capital from Rs. 402.5 million to Rs. 1 billion and the number of equity shares from 402.5 million to 1 billion through a bonus issue. Before the bonus issue, the share price of IEX had been Rs. 729.55. This fell to Rs. 255.75 and continued moving in the range of Rs. 238–Rs. 266 during December 2021 – January 2022. However, many analysts suggested buying the IEX stock considering the future growth of the Indian power sector. But investors also needed to consider the share price trend of IEX during its announcement of other corporate actions.

Pedagogical Objectives:

• Understand the impact of a bonus issue on the share price movement of the company.
• Understand the relevance of a bonus issue from both the investor’s and the company’s point of view

Keywords : IEX; Indian Gas Exchange; CRISIL; Impact of Bonus issue on share price; Petroleum and Natural Gas Regulatory Board; Bonus issue; Corporate Action; Stock dividends; Fully Paid Bonus Shares; Partly Paid Bonus Shares

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