Bharat Electronics board approves 2:1 bonus issue of equity shares

In its registration application, BEL said: “issuance of bonus shares to the shareholders of the company in the ratio of 2:1 (two bonus shares for each share of shares held) by capitalization 487.32 crore in favor of the Company’s free reserves and surplus.”

Generally, a publicly traded company pays out bonus shares on their shares to current shareholders for free. This allows a shareholder to capitalize a portion of the company’s retained earnings for conversion from its share premium account or distribution of treasury shares.

In particular, the company has received approval to increase its authorized share capital by: 500 crore ahead.

The Administrative Ministry approved this on August 1. It should be noted that in January this year, BEL announced its plan to increase its share capital from 250 crore to 750 million.

Furthermore, the company has moved its 68th Annual General Meeting (AGM) to August 30 from earlier August 25.

That said, the proposal for bonus shares and increasing the authorized share capital is now subject to shareholder approval at the AGM.

Previously, BEL announced that the final dividend for the 2021-22 financial year, if determined at the 68th AGM, will be payable within 30 days from the date of publication to the members whose names are on the company’s register of members as of August. 10, 2022.

This also means that BEL will become ex-dividend on 8 August.

Dividends are a form of incentive that shareholders receive for holding shares of a profitable company. Meanwhile, the ex-dividend date for a share is the business day prior to the record date of the declaration of eligible shareholders for the payout. This also means that investors who purchase the stock on the ex-dividend date or later will not be eligible for dividends announced by the company for a particular tax.

The company’s final dividend is to the rhythm of 1.5 per share share (150%) with a par value of Re 1 each fully paid up before FY22.

BEL has presented its financial performance for the quarter ended June 30, 2022 (Q1FY23).

During the first quarter of this financial year, BEL .’s independent net profit amounted to 431.49 crore against the profit of 11.15 crore registered in the corresponding period of the previous year. Stand-alone sales for the period amounted to 3063.58 crore against 1564.34 crore in the same quarter last year. As of June 30, 2022, the company’s order book position is around 55,333 crores.

Should you buy the shares?

Abhijit Mitra, Mohit Lohia and Pritish Urumkar, research analysts at ICICI Securities, said: “Over the past 5 years there has been an overhang on BEL’s earnings due to expectations of lower margins. Earning expectations for BEL have always been constrained by the shift made by Defense (in FY18) in converting the nomination-based order from ‘fixed cost’ to ‘cost plus’, capping margins at 7.5% from 12.5% ​​earlier. Keeping margins in the 21-23% range, with great confidence in reaching the upper band, it can be rest assured that concerns about margin compression are a thing of the past, which is likely to improve earnings per share growth prospects in BEL, in our opinion.”

Speaking of key revenue drivers, the analysts said: “BEL posted revenue of Rs8 billion in Q1FY23 Shortage of revenue of 26 billion in FY22 due to chip shortages. Almost 5 billion will be realized in Q2FY23. To achieve ~9% revenue growth in FY22, management had to move forward on some projects from FY23. As major OEMs’ chip obligations have not yet been (fully) resolved, leading to implementation delays, management is confident of approximately 15% revenue growth for FY23. Nearly 40% of the Rs15 billion EVM/VVPAT order will be executed in Q4FY23 and 60% of the same will be executed in Q1FY24.”

According to the analysts, the company’s non-defense revenue to see substantial growth in FY24E. They said: “BEL has given the final proposal to the UP government and final approval from MoHA is expected in a few months, according to the company. Management highlighted a potential market of Rs 120 billion in Train Collision Avoidance System (TCAS) where BEL’s product under DMRC has completed the ingenious Automatic Train Supervision System (i-ATS) developed by BEL and the order is expected soon.”

Potential order intake in FY23 is – 1) Himshakti program of Rs33 billion, ii) Atulya medium power radar of ~Rs20-30 billion, iii) ~Rs100 billion expected from naval shipyards, and iv) Akash prime for 2 squadrons of ~Rs30- 40 billion.

“About Rs 100 billion is the potential market for TCAS orders from Indian Railways, where BEL’s product is currently being tested. We maintain BUY on the stock with a revised target price of Rs 316/share (previously Rs 300),” added to the analysts.

BEL shares closed on BSE 284.10 each higher by 7.40 or 2.67% on Thursday. Shares have reached an intraday high of 287.65 each, which is just a few paisas away from .’s 52-week high 287.75 each. Overall, stocks are up 3.96% over the course of the day.

The company’s market capitalization is around 69,223.61 crore.

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