Shares of Tata Steel, the country’s largest steelmaker, rose nearly 3% in opening deals on Wednesday as investors cheered the company’s robust financial performance in the March quarter and its board recommendation for a stock split. The board of directors of Tata Steel on Tuesday announced a dividend of ₹51 per share and also proposed a 10-for-1 split of the steel major’s equity shares.
Reacting to the Q4 earnings announcement, Tata Steel shares gained as much as 2.7% to hit a high of ₹1,330 apiece against the previous closing price of ₹1,295.1 on the BSE. At the time of reporting, the stock was trading flat with a marginal loss at ₹1,294, in line with the benchmark index. Meanwhile, the BSE Sensex was trading 309 points lower at 56,667 levels. The index heavyweight had touched its 52-week high of ₹1,534.60 on August 16, 2021, and a 52-week low of ₹1,018.45 on May 3, 2021.
Tata Steel on Tuesday reported a consolidated net profit of ₹9,835 crore for the fourth quarter ended March 31, 2022, driven by continuous improvement in performance despite the significant surge in international coal prices and the inflationary impact of various commodities in the wake of the Russia-Ukraine crisis. The profit grew by 37.32% as compared to ₹7,162 crore in the corresponding quarter of the previous fiscal. Consolidated revenue for the quarter jumped 38% YoY to ₹69,323 crore.
For the full financial year 2021-22 (FY22), the company logged a consolidated net profit of ₹41,749 crore, marking a five-fold jump from the last fiscal's ₹8,190 crore, thanks to a sharp improvement in margins. The total revenue soared to ₹243,959 crore as against ₹156,477 crore in FY21. The company reported the highest-ever consolidated EBITDA of ₹63,830 crore, more than double of last fiscal’s ₹30,892 crore. The stellar performance pushed Tata Steel ahead of Tata Consultancy Services (TCS) in terms of the most profitable company in the Tata Group.
As part of the overall policy to reward the shareholders, the board of Tata Steel announced a record dividend of ₹51 per share and also recommended the splitting of the shares to ₹1 per share face value in a 10:1 split.
The board has declared a dividend of ₹51 per fully paid-up ordinary share of ₹10 each (510%) to the shareholders of the company for the financial year ended March 31, 2022. “Further, in respect of the outstanding partly paid-up ordinary shares of the company on which call money remains unpaid as on the date of book closure for the dividend payment, the dividend will be paid in proportion to the amount paid-up on such shares, i.e., ₹12.75 per partly paid-up ordinary share of ₹10 each (paid-up ₹2.504 per share) (510%),” Tata Steel says in a BSE filing.
The board also considered the proposal for a sub-division of 1 equity share of the company having a face value of ₹10 each into ten equity shares of ₹1 each, subject to requisite approvals.
Will the stock split impact shareholders?
Tata Steel’s board on Tuesday proposed a 10-for-1 split of the steel major’s equity stocks, subject to shareholders and other regulatory approvals. The rationality behind the stock split is to enhance the liquidity in the capital market, widen the shareholder base, and make the shares more affordable to small investors.
When a company declares a stock split, the number of shares owned by shareholders increases, but their underlying value remains the same. As the number of shares increases, the price per share goes down. A company generally chooses to split its shares to make the share more affordable to small retail investors and increase liquidity.