Eicher Motors Share | Eicher Motors Stock Split, Eicher Motors results

Eicher Motors Stock Split, Eicher Motors results | Eicher Motors Share 

Let's teach you a new thing which will help you being a good investor. Say if a company comes and tells you in place of your one share, you will get ten shares. From one share, your total shares will become ten, in the case of two shares, you will become twenty. What would be its implication on you? This term is called Stocks Splits. 

When does a company do this? What are its benefits?

In recent times, there has been news of Eicher Motors that this company is going to split its share into 1:10. What are its implications on you as an investor? and should you invest in Eicher Motors now or not?

Friends, let's start with Eicher Motors business? We will give an overview of the company. When Siddhartha Lal took over this company, he changed its destiny. At a time this business operated in 15 businesses but in recent times it has started operating in 2 businesses. 

First, Its motorbike business. You might have heard of Royal Enfield. The whole Indian market is owned by Eicher Motors. If we talk about its revenue, 80% of its revenue comes from it. Rest 20% revenue is from commercial vehicle segment wherein it has a joint venture with Volvo. 

This was about its business. Now let's talk about the recent news cause of which Eicher Motors is in spotlight. This news is on Stock Splits! What are stock splits and why did it announce stock split?

You might know when a company newly starts trading in the share market, it introduces its shares via IPO. Say if a company came up with its stocks at 500 each. Now the company performed exponentially good. After a few years, its shares went from Rs 500 to Rs 5000,10000. When a company's share price increases, its liquidity gets lessened. We won't say that liquidity is lessening in case of this company but when a particular share that trades at Rs 20K,25K and when a same share trades at Rs 500, Rs 1000, the liquidity is different in both the cases cause a common investor cant buy a stock at Rs 20K,25K but he might be interested in buying it.

If he gets the same share at Rs 500 or Rs 1K, our retail investors, as well as others, would be able to buy this share cause of which many companies try to keep their share price in a range cause of which it splits its stocks so that it is feasible for every investor. Eicher Motors current share price is above Rs 20K if you want to buy even 2 to 3 shares here then you will have to invest 50K,60K which is a big amount for any common investor.

Say if stock split happens here and rather than one share it gives away ten shares to investors then 20k worth shares will split and become 1:10. If any company splits its shares, in the ratio, it splits it in, normally its share price gets reduced in that ratio. The current Eicher Motors share price is 20K. It wants to split it at 1:10.

Its face value will reduce cause of which its share price will come down by 10 times. From Rs 20K, this share will be made available in 2K. If the share comes down to 2K there might be many investors interested to invest here and if that happens, liquidity can increase, this is just an assumption that the liquidity can increase but we will only know in the future how much this step impacted the company's liquidity.

People generally give an example of Tesla, from the time Tesla split its stocks, it has gone up by 50% from then. So will Eicher Motors also go up like that after its stock split? I would like to give small information on it. Which many people can't understand that Eicher Motors announced its Stock Split in June which means from June the market knows about this. 

From that time till now, Eicher Motors' share price has gone up by 49% to 50%. On June 12th Eicher Motors boards permitted to the stock split and in time, its stock will get split in 1:10. Then its shares used to trade at Rs 16K. Now it is around Rs 21K.  If you feel you invest here and earn returns after the Stock Split, this is somewhere a wrong approach cause market has already priced this Stock Split

If you approach it thinking you can earn well in 10 days then it might be a wrong strategy. If you were always interested in this company and couldn't invest cause of its high price then as now it's available in 2K. The value would be of 2K and that many extra shares will be made available.

If you weren't able to invest before the cause of its high price and are planning to invest now at 2K then I can help you here with financial information, quarterly results so that you can make an informed decision that if you want to make an investment at 2K then on which basis you should do this investment. You should focus on these things and should do a good analysis then you should think of investing like a good long term investor.

Eicher Motors' market capitalization is around Rs 60000 Cr. Its PE Ratio is around 45. In comparison with its peers, its PE ratio is compatible, but a bit on the higher side. 

This quarter, Automobile company sector has been heavily impacted by coronavirus which can be seen in every auto company's P&L statement. Let's get back to Eicher Motors. This company reported its revenue in June 2020 as Rs 818 Cr in comparison with June 2019 Qtr at Rs 2300 Cr in which its total revenue has decreased by a significant amount. 

Talking about its Net Profit, in June Qtr 2020 its net profit was reported at Rs 55 Cr means it has faced a loss of -55 Cr in the recent Qtr in comparison with June qtr 2019, this company had a net profit of Rs 452 Cr. As compared to the last quarter it has performed pretty bad but this negative impact due to corona can be seen in every automobile company. 

This quarter's result isn't favorable and we do not know about the future, here we have a information to focus on. This information is Management Commentary and the management informs the public on what it is expecting. Management informed that this quarter wasn't good and it has impacted all the automobile companies but they are confident. The demand for motor and the commercial vehicle will improve in the future and in the coming quarters, they were asking investors to expect good returns, if the demand revives. 

If we talk about the total volumes of Royal Enfield on how many units it sold then we can see a decline of 16%. If we talk about the Eicher Motors motorcycle segment then its market share is still at 5.9% which is flat with no decline. If we look at 250CC motorcycle segment, where the market share is of 96% and this percentage is intact from the last quarter means even though the market has been impacted.

We can't see much trouble with this company. Other than this, the company is trying to export if we see Royal Enfield's export ratio then we can see some dip here but its expansion plans in other countries are very much inline and in the future, we can look for some improvement. But you will have a look into this company's quarterly results and track every information on how this company is performing in a particular parameter cause management is hopeful. There are chances of the company performing well but actually how does a company perform, will only be known in the future. 

Now we will talk about the company's shareholding pattern. Its total promoters holding has been constant for a long time at around 49.28% but if I talk about Domestic Institutional Holdings then it's at 11.94% and mutual fund investment has increased in recent times. FIIs have more than 26% of this company.