Indian investors woke up to a surprising sight recently—Bajaj Finance shares appeared to have crashed nearly 90% on the stock exchanges. However, this dramatic plunge isn’t due to any fundamental weakness or market panic. Instead, it’s the result of a planned corporate action: a bonus issue and stock split. Here’s why you shouldn’t worry.
The shares of Bajaj Finance have on June 16 resumed trade after adjusting stock split and bonus issue with effect from today, opening at Rs 956 apiece, nearly 90 percent lower than the previous closing price of Rs 9,331 apiece.
📌 What Exactly Happened?
Factoring in the adjustment, the shares are lower by 0.7 percent in early trade, in-line with the broader market weakness and a subdued start to the Nifty 50.
The leading NBFC on April 29 had announced a bonus issue of shares in the ration of 4:1. This would mean that the eligible shareholders will receive 4 bonus shares for every single Bajaj Finance share they own. Additionally, the company also announced a stock split in the ratio of 1:2.
The NBFC had last announced a share split in 2016, dividing the shares in 1:5 ratio at that time.
✅ Breakdown of the Corporate Action:
Bonus Issue:
Ratio: 1:1 (For every 1 share held, investors got 1 additional share free)
Stock Split:
From: Face value of ₹10
To: Face value of ₹2 (1 share split into 5 shares)
Example:
If you owned 1 share of Bajaj Finance earlier, after these adjustments, you now own 10 shares. Naturally, the price of each share has dropped, but your total investment value remains the same.
💼 Why Did Bajaj Finance Opt for This?
Liquidity: To make its shares more affordable for retail investors
Market Participation: More participation = More liquidity = Greater volume of trades
Positive Sentiment: Bonus issues are generally viewed as a sign of strong fundamentals and a way to reward shareholders
❗ What About the 90% Plunge?
The 90% drop in the stock price is purely mathematical and due to the stock split and bonus issue. It’s NOT due to a business problem, negative news, or declining fundamentals. The market capitalization of Bajaj Finance hasn’t changed.
📈 Should You Be Concerned as an Investor?
No. The actual value of your holdings remains intact. Over time, stocks often recover adjusted to their new valuations and can potentially see upward movement based on company performance, earnings, and market sentiment.
🏦 About Bajaj Finance
Sector: NBFC
Focus Areas: Consumer finance, SME lending, commercial lending
Track Record: Consistent earnings, strong management, robust asset quality
🔖 Conclusion: Stay Focused on Fundamentals
While a sharp fall in the stock price may seem alarming, it’s essential to understand the reason behind such adjustments. In Bajaj Finance’s case, this is a technical adjustment due to corporate actions. Investors should focus on long-term fundamentals, not temporary pricing shifts caused by share adjustments.
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