Here's why BEML's stock dropped 50% today
What's the story
State-run Bharat Earth Movers Limited (BEML Ltd.) has executed a 1:2 stock split, doubling the number of shares and halving the face value from ₹10 to ₹5. As a result, its price has dropped by about 50% today, reflecting the mechanical adjustment rather than a decline in the company's valuation. The stock opened slightly lower at a 1.63% dip but recovered to trade near ₹2,180 apice on NSE at the time of writing, demonstrating normal market behavior after a split.
Market implications
Understanding stock splits
A stock split is a corporate action that increases the number of shares in circulation by dividing existing ones into smaller units. For instance, if you held 100 shares of BEML on Friday's closing price, those would be converted into 200 shares post-split. However, it's important to note that while the number of shares increases and their individual value decreases, the overall worth remains unchanged.
Financial outlook
Corporate action details and stock performance
This is the first time BEML has undertaken a split or bonus kind of corporate action. The company had previously spun off its land assets business in 2022. On Friday, BEML shares closed 1% lower at ₹4,391. The stock has remained stable over the past month but is up 6.5% year-to-date, outperforming the Nifty PSE index which gained 5.2% year-to-date.