NMDC Considers Bonus Share Issue On November 11; How Shares Have Performed?

NMDC, a Navratna Public Sector Enterprise under the Union Ministry of Steel, announced on November 5, 2024, that its board of directors will meet on November 11 to deliberate on a proposed bonus share issuance, after reviewing the company's financial results on that day, for the quarter ending September 2024. In an exchange filing, NMDC stated,  “Meeting of Board of Directors of the Company is scheduled to be held on November 11, 2024 inter-alia, to consider, approve and take on record the Unaudited Financial Results (Standalone and Consolidated) of the Company for the quarter ended 30th September 2024 and a proposal for issue of Bonus Shares to the shareholders of the company, subject to requisite approvals.” This would be the company’s first bonus issue since May 2008, when it announced a 2:1 bonus share ratio.

What Is Bonus Issue?

When a company issues bonus shares, the total number of shares will increase in proportion to the ratio, the bonus issue is announced, but the total share capital remains the same. The total share capital is only split between the shares in the new ratio, by converting profits or reserves into share capital.

Bonus issues require using more cash reserves, which could have otherwise been given to shareholders as dividends. So in case of a bonus issue, the total paid-up capital increases using its dividend while the face value of the share remains the same.

NMDC Stock Price Performance

Metal prices have gained as the dollar weakened ahead of the US presidential election and on expectations of more stimulus measures from Chinese authorities. As India's largest iron ore producer, NMDC prices also saw a boost.

Following the announcement, NMDC’s stock saw a notable increase, rising by almost Rs 6. Currently, the stock is trading at closing at Rs 237.95, reflecting a 1.37 per cent rise on the National Stock Exchange today. Over the past year, NMDC shares have gained 48.39 per cent, although they have dipped 11.67 per cent in the last six months.

In the first quarter of FY25, NMDC reported a 19 per cent year-on-year growth in net profit, reaching Rs 1,969 crore. However, revenue from operations remained stable at Rs 5,414 crore. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) were Rs 2,725 crore in Q1 FY25, up from Rs 2,276 crore in Q1 FY24, and the EBITDA margins showed a significant increase to 51 per cent from 42 per cent year-on-year.