IRCTC Stock Split After Futures and Options Ban List
After the approval of IRCTC Stock Split (Indian Railway Catering and Tourism Corporation), it has been on investors’ radar. On 28th October 2021, the IRCTC shares split in the ratio of 1:5, sub-dividing the face value of shares from 10 per share to Rs. 2 per share. On this day, the share surged to 15 per cent to Rs. 949.65 on BSE.
The board of IRCTC has approved the stock split on 12th August 2021. And the price of IRCTC share has reached the maximum high of Rs. 1279 on 19 October 2021. The idea behind the IRCTC stock split is to increase liquidity by making the share more affordable to retail investors. It will help to make a strong shareholder’s base.
Stock Market analysts identified many reasons for this continuous hike in the IRCTC stock price. One of the main reasons for the spike in share price is increasing vaccination drive and Covid 19 remaining under control, which increases the economy gradually. Another reason is that there are some special trains running during the festive season. These are the main reasons that fueled the IRCTC stock.
IRCTC Stock Split Share Valuation
IRCTC got listed on the stock market on 14 October 2019 at the price of Rs. 320 per share. Since then, its share price has increased to 1737 per cent or 18 fold. This year, its price hiked to 300 per cent, which is why the split was necessary to increase liquidity in the market.
The stock of IRCTC reached its peak on 19th October 2021. After a few days, IRCTC stock got split in the ratio of 1:5. It means one stock is divided into five stocks or, for one stock investors will get five stocks. Stock-split is done when the stock becomes too expensive. But the stock split does not make any impact on shareholders’ or company’s performance, rather the stock split increases the liquidity of the stock.
As seen with the IRCTC shares, the price of the stock reduced down by 78 per cent. But it does not mean that the price of the stock has reduced by 78 per cent. There will be an increase in the number of shares in the investor’s portfolio. And the overall stock in the portfolio will be adjusted within one-two day.
Suppose before the split the investor had 10 shares of IRCTC in his portfolio pricing at 4000 then his total portfolio is equal to 10 X 4000 = Rs. 40000. After a 1:5 split, he will have 10 X 5 = 50 shares in his portfolio. The stock price will also reduce by 5 times, which means if the stock price before the split was Rs. 4000, then after the split, it will be 4000/5 = Rs. 800. Therefore, his portfolio will be 50 X 800 = Rs. 40000. Hence, there is no profit or loss for the investor.
But it will allow more investors to buy the stock, which increases the liquidity of the stock. The split in shares will get reflected within 2-3 days in your Demat account.
What is the reason for the fall in share price of irctc?
The primary reason for the fall in IRCTC share price is due to a ban on IRCTC stock from the NSE futures and options (F&O) list. The stock is banned because it has crossed the 95 per cent threshold of the market-wide position limit (MWPL). Also, the news of a 50 per cent share of revenue acquired from convenience fees made more panic among the investors. Later this news was withdrawn from the Ministry of Railways.
As per the result released by IRCTC of the June quarter for the financial year 2021-22, the company reported a profit of Rs 82.5 crore.
A stock split is neither good nor bad for investors. However, it is viewed as a positive event because more investors can invest in the company, and the overall price of the stock may increase.