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Eicher Motors shares jump 10% after 1:10 stock split comes into effect

Updated : August 24, 2020 12:10 PM IST

The share price of Eicher Motors jumped over 10 percent after the 1:10 stock split came into effect on Monday. The stock gained for the third trade session today, making it to the top gainers' list on Nifty in terms of gains in percentage.

The company, in its June board meet, had approved a stock split in the ratio of 1:10 -- sub-division of equity shares from the existing one equity share of the face value of Rs 10 each into 10 equity shares of the face value of Re 1 each.

"Members of the company at its 38th Annual General Meeting on August 10 approved sub-division of each existing equity share of the face value of Rs 10 each into 10 equity shares of the face value of Re 1 each," Eicher Motors said.

The stock, however, pared gains, trading 6.67 percent higher at Rs 2316.80 per share, at 12:01 pm. It has fixed August 25, 2020, as the record date for the stock split.

The management said that the purpose behind splitting share price is to facilitate a larger shareholder base and aid liquidity.

For the June quarter, the Royal Enfield maker reported a loss of Rs 55 crore as against a profit of Rs 452 crore in the corresponding quarter last year. The company's revenue from operations also declined to Rs 818 crore in Q1FY21 from Rs 2,382 crore in Q1FY20.

Post the earnings, global brokerage house CLSA downgraded the stock to 'sell' from 'underperform' and reduced its target price to Rs 19,000 from Rs 19,500 (Pre-stock split).

"Eicher Motor's 1QFY21 results came in lower than forecasts. Apart from operating leverage, the miss was largely driven by a lower gross margin. Unlike peers, Eicher has not been able to fully pass on BS6 related costs. The company also ran promotional schemes which resulted in gross profit/vehicle declining 13 percent over the past two quarters. We believe Eicher’s valuation premium (80 percent over Hero and Bajaj) is unsustainable in the absence of volume and margin outperformance versus peers," added CLSA.

Eicher Motors shares jump 10% after 1:10 stock split comes into effect

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