Bajaj Finance Shares Didn't Crash 90%: Here's What Stock Split and Bonus Really Mean
India's leading non-banking financial company (NBFC), Bajaj Finance, recently announced a series of shareholder-friendly corporate actions that have created significant confusion in the market. Many investors mistakenly believed the stock had crashed dramatically, when in reality, the company had simply executed a bonus issue and stock split that altered the share price mathematically without destroying shareholder value.
The confusion stems from a fundamental misunderstanding of how corporate actions affect stock prices. When companies announce stock splits and bonus issues, the share price adjusts proportionally to maintain the same market capitalization, meaning investors don't lose money despite the apparent price drop.
Bajaj Finance's Major Corporate Actions Explained
Following its robust Q4 FY2025 results, Bajaj Finance announced three major corporate actions that will be implemented on or before June 27, 2025:
🎁 4:1 Bonus Issue
For every 1 share held, investors will receive 4 additional bonus shares at face value of Re. 1 each, funded from the company's free reserves of ₹4,971.43 crores.
✂️ 1:2 Stock Split
Each existing share with face value of Rs. 2 will be split into 2 shares with face value of Re. 1 each, making shares more affordable for retail investors.
💰 Record Dividend of ₹56 per Share
The company declared a final dividend of ₹44 per share plus a special dividend of ₹12 per share, totaling ₹56 per share - representing a massive 2,800% dividend yield based on face value.
Why Stock Prices "Drop" After These Actions
The apparent stock price crash is merely an accounting adjustment. Here's what happens mathematically:
Before Corporate Actions
If an investor owned 10 shares at ₹9,000 each, their total investment value was ₹90,000.
After Corporate Actions
The same investor will own 100 shares (10 × 5 from bonus + split) at approximately ₹900 each, maintaining the same ₹90,000 total value.
The key insight is that while the price per share decreases, the number of shares increases proportionally, ensuring that the total investment value remains unchanged. This is why experienced investors don't panic when they see such price movements following corporate action announcements.
Understanding Stock Splits vs Bonus Issues
| Aspect | Stock Split | Bonus Issue |
|---|---|---|
| Definition | Dividing existing shares into smaller units | Issuing additional free shares to existing shareholders |
| Source of Funding | No funding required | Company's free reserves and retained earnings |
| Face Value Change | Face value decreases proportionally | Face value typically remains same |
| Market Capitalization | Remains exactly the same | Remains exactly the same |
| Investor Benefit | Improved liquidity and affordability | Increased shareholding without additional investment |
Why Companies Implement These Actions
Strategic Benefits for Companies and Investors
Enhanced Liquidity: Lower share prices make stocks more accessible to retail investors, increasing trading volume and market participation.
Psychological Appeal: Many investors prefer owning more shares at lower prices rather than fewer shares at higher prices, even though the total value remains identical.
Reward Loyal Shareholders: Bonus issues serve as a way to distribute accumulated profits without paying cash dividends, allowing companies to conserve cash for growth opportunities.
Optimal Trading Range: Stock splits help maintain share prices within an optimal trading range that appeals to a broader investor base.
Bajaj Finance's Strong Financial Performance
These corporate actions come on the back of Bajaj Finance's stellar Q4 FY2025 performance. The company reported a robust 19% year-on-year growth in net profit to ₹4,546 crores, with standalone figures showing 16% growth to ₹3,940 crores compared to ₹3,401 crores in the previous year.
The NBFC's strong fundamentals justify these shareholder-friendly moves. Over the past year, Bajaj Finance shares have gained 25%, touching a 52-week high of ₹9,709.75 on April 24, 2025, before the recent corporate action-related price adjustments.
What Investors Should Know
Record Date Importance: Only shareholders holding shares on the record date will be eligible for bonus shares and dividends. The exact record date will be announced closer to the implementation.
Tax Implications: Bonus shares are generally not taxable at the time of receipt, but the cost of acquisition gets adjusted for future capital gains calculations.
Trading Considerations: Post-corporate action, the stock will trade at adjusted prices. Historical price charts will be adjusted to reflect these changes for accurate technical analysis.
This marks Bajaj Finance's second bonus issue, with the previous 1:1 bonus issue occurring in September 2016. The current 4:1 bonus ratio is significantly more generous, reflecting the company's strong financial position and growth trajectory.
Market Outlook and Expert Views
Despite the recent corporate action-induced volatility, four major brokerages maintain their 'Buy' recommendations on Bajaj Finance, citing the company's strong fundamentals and growth prospects in India's expanding consumer finance sector.
The NBFC sector in India continues to benefit from increasing financial inclusion, growing consumer credit demand, and digital transformation initiatives. Bajaj Finance, being the largest NBFC in the country, is well-positioned to capitalize on these trends.