Your 50 shares in Bajaj Finance can turn into 500 shares after bonus issue, split: Should you buy it?

Shares of the Nifty50 constituent - Bajaj Finance will trade ex-dividend for its stock split as well as bonus share issuance on June 16. So, as now you have a day more to buy into its shares and crack the deal with more number of shares in return, here is a quick analysts take on whether or not you should buy into Bajaj Finance shares.

Prashanth Tapse, Sr. VP Research at Mehta Equities said, "If you are a long-term investor and confident on Bajaj Finance's fundamentals, buying shares before the ex-date could be beneficial to capitalize on the stock split and bonus issue. Profit-booking and price adjustment frequently follow around the ex-date, introducing short-term volatility. However, this corporate action before or after doesn’t bring any fundamental change in the business dynamics rather it would only enhance liquidity in the market."

Short-term volatility may, remain in the counter on or before the ex-date; while long-term investors should focus on fundamentals. In terms of valuations, the stock is trading at a premium relative to its peers. As far as my historical readings, it is better to wait and watch corporate adjustment and later investors can start accumulating post settlement of volatility, which was due to the corporate action, he added.

First let's see what 50 shares will turn into after stock split and bonus shares

Bajaj Finance 4:1 bonus share isssue and 1:2 stock split

Bajaj Finance has announced a 4:1 bonus share issue, meaning a 1 share in the company will make you eligible for additional 4 shares, taking your total holding in the stock to 5 shares. Likewise, if you are holding 50 shares in the scrip, you would after the bonus issue will be in ownership of 250 shares.

And then on 1:2 stock split, your 250 shares will be now 500 shares.

Bajaj Finance- Analysts' take 

In its Axis Punch segment, Axis Securities has suggested buying the scrip for a target of Rs 10,225. The brokerage noted that it expects the company to deliver a strong AUM/NII/Earnings growth of 25/26/25% CAGR over the medium term, driven by

(i) Steady-to-marginally improving NIMs, (ii) Operating leverage driving cost ratio improvement, and

(iii) Positive outlook on asset quality, keeping credit costs under control. We expect BAF to deliver a RoA/RoE of 4.5-4.6%/19-21%, broadly in-line with the management’s long-term guidance.

Earlier before, BOB Capital Markets has set a target of Rs 11,025 iterating thattailwinds from potential rate cuts to aid cost of funds coupled with a tight control on opex, will likely aid earnings growth.

We expect its AUM to grow at a CAGR of 25% over FY25-FY27. Hence, we assume coverage with BUY on BAF with Target Price of Rs 11,025, assigning FY27E P/BV of 5.5x on standalone entity, it added.