A multibagger stock with 1193% returns in the past year gained 18% after its board announced the record date for a stock split. The electric equipment company is engaged in the end-to-end manufacturing, procurement and distribution of a range of high-end yet advanced solar products, medical devices and energy-efficient lighting solutions. 

Servotech Power Systems, an NSE-listed stock, had announced a stock split of its equity shares in the ratio of 1:2. Thus, each share having a face value of ₹ 2 will be divided into two shares having a face value of ₹ 1 each. The rationale behind the split was to enhance the liquidity of its shares and to encourage wider participation in the stock market. 

The company recently fixed July 28 as the record date for the purpose of subdivision (split) of equity shares. On Tuesday, the company’s shares opened at ₹ 142.90 and they closed at ₹ 167.90 apiece on Thursday, indicating gains of 18% after the announcement. 

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In the past year, its share price increased from ₹ 12.99 per share to ₹ 167.90, thereby delivering multibagger returns of 1193%. Therefore, if an investor had invested ₹ 1 lakh in the company’s shares a year ago, the value of their holdings would have been ₹ 12.93 lakhs today! 

With a market capitalization of ₹ 1,762 crores, Servotech Power Systems is a small-cap company. It has an ideal return on equity of 17.19% and an ideal debt-to-equity ratio of 0.51. Its shares were trading at a price-to-earnings ratio (P/E) of 156.96, which is significantly higher than the industry P/E of 35.4, indicating that the stock might be overvalued as compared to its peers. 

For the entire year (FY23), the company’s profit rose to ₹ 11.06 crores from ₹ 4.05 crores in the previous year (FY22). Its revenue increased to 278.64 crores in FY23, as compared to 144.25 crores in FY22. 

Written by Simran Bafna 


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