In announcing earnings for the first quarter ended June 2022, Steel Strips Wheels Ltd said its board had approved a 1:5 stock split. Shares of Steel Strips on the BSE fell more than 5% to Rs 801 per share in afternoon trade on Tuesday.

At its meeting today, the board has approved the subdivision of the company’s shareholding from the existing one share of Rs 5 of par value into five shares of Re 1 of par value each, subject to the approval of the company’s shareholders.

The company added that the date of share registration for the share split or share split will be determined by shareholders after obtaining shareholders’ approval at the upcoming annual general meeting (AGM) and will be notified in due course.

Explaining the rationale behind the stock split decision, Steel Strips said it is to increase the liquidity of the company’s stock on the stock market and to encourage participation by small investors by making the company’s stock affordable.

In addition, the board approved amendments to the capital provisions in the company’s memorandum of association to achieve a subdivision of the company’s equity, subject to the approval of the company’s shareholders.

A stock split increases the number of outstanding shares by issuing more to existing shareholders. A stock split lowers an individual stock’s market price but does not change the company’s market value.

If a company’s price level is high, it makes a stock split decision to make its stock more affordable, leading to increased stock liquidity.

The company’s net profit fell 5.8% to Rs 48 crore in the first quarter of fiscal 2023 from Rs 51 crore in the same period a year earlier, while its revenue rose nearly 50% year-on-year to Rs 1,016 crore (YoY).

Steel Strips is a manufacturer of automotive steel and alloy wheels. Inventory of automotive accessories has grown by more than 26% in a year and will decline by more than 6% in 2022 (YTD).