At its latest board meeting, LKP Finance approved an increase in its authorised share capital from Rs 30 crore to Rs 110 crore, subject to shareholder approval. The board also cleared the issuance of bonus equity shares in the ratio of 4:1, meaning shareholders will receive four new equity shares for every one share held as on the record date. The bonus shares will be issued by capitalising the company’s securities premium account as at December 31.
The company said the bonus shares are expected to be credited or dispatched within two months of the board meeting, on or before March 19, subject to shareholder approvals and regulatory clearances.
LKP Finance is part of the Mumbai-based LKP Group, a diversified financial services group with interests spanning broking, capital markets, investment banking, financing and advisory services. The company operates as a non-banking financial company (NBFC), focusing on lending and investment activities, and also benefits from the broader group’s presence in equity broking and market intermediation.
Over the past year, renewed interest in financial stocks, improving balance sheet visibility and expectations of better capital market activity have driven a re-rating in several smaller finance companies, including LKP Finance.
A bonus issue is a way for companies to reward shareholders by converting accumulated reserves into share capital. While it does not change the overall value of an investor’s holding immediately, it increases the number of shares outstanding and improves stock liquidity. Companies typically announce bonus issues when they have a strong reserve position and want to signal confidence in their long-term prospects.
In LKP Finance’s case, the bonus shares will be issued by capitalising the securities premium account, which reflects past capital raised over and above the face value of shares. Post the bonus issue, the share price is expected to adjust proportionately, but shareholders will hold a larger number of shares.Investors often view bonus announcements positively, especially in stocks that have already delivered strong returns, as they improve tradability and broaden the investor base. The sharp rally in LKP Finance over the last year suggests the market has been factoring in improving fundamentals and stronger growth expectations.