Bonus Shares Alert: This Zero Debt Company Announces Bonus Issue

I went to an ice cream parlour recently and asked for a scoop of my favourite ice cream. The 'uncle' was in a happy mood that day and gave me half a scoop more.

I was surprised and asked him about the reason for this generosity. Smiling all the way, he told me he had just received a message that the biggest stock in his portfolio is going to pay him a bonus.

That's when I realised that in 2022 many investors would be happy too because 2022 is clearly a year of bonuses.

This year, 73 companies have announced bonus issues. Many companies are still announcing bonuses.

Every now and then, we see headlines about a multibagger stock announcing a bonus issue or a company's board will consider a bonus issue.

One of these companies is IT company eClerx Services. It announced a bonus issue this month.

Recently, we wrote to you about REC's bonus issue and did a deep dive. Today, we talk about eClerx Services' bonus in detail.

• eClerx Services announced a bonus on 9 August 2022.
• The bonus ratio is 1:2. This means one bonus share will be issued for every two shares held by investors.
• The bonus record date will be decided by shareholders, through a postal ballot.

Note that the company came out with its buyback of shares last year in September.

The company has declared two bonuses so far. The first bonus was in 2010 in the ratio of 1:2. The second was announced in 2015 in the ratio of 1:3.

The recent bonus issue is eClerx's third.

The issue of bonus shares will increase the liquidity of the stock. This will decrease the share price and make it more affordable for investors.

A look at the financials

Revenues of eClerx Services have been increasing steadily. In the last two years, sales have seen quite a big jump.

On a CAGR basis, sales have grown by 10% in the past five years.

Being in the service sector, eClerx Services has quite a high-profit margin. The lowest profit margin in the past 5 years was 14%, which is quite high in itself.

The financials of the company paint a very strong future of the company. It has zero debt on its books.

Financial Snapshot of the company

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	14,053	14,792	14,843	15,989	21,850
Growth	3%	5%	0%	8%	37%
Operating profit	4,077	3,574	3,716	4,836	6,852
Operating profit margin	29%	24%	25%	30%	31%
Net profit	2,899	2,283	2,090	2,828	4,178
Net profit margin	21%	15%	14%	18%	19%

Source: Equitymaster

2022 was harsh on the entire IT sector. IT stocks are falling amid growing concerns of recession in the US among other reasons.

Despite this, the company's revenue has been consistently increasing. Profits have also gone up with a few setbacks.

eClerx has a strategic approach for inorganic growth. The company believes in the method of acquisitions, as is the case for many good IT companies.

In 2020 it announced the acquisition of Personiv an outsourcing solution company with offices in the US, India, and Philippines worth US$ 34 m.

No wonder it is one of the fast-growing smallcap stocks with zero debt.

How shares of eClerx Services have performed recently

eClerx Services share price rose around 3% in the past one year. On a YTD basis, the share price has fallen around 23% as all IT stocks have tumbled.

Even fundamentally strong ones like TCS, Wipro, Infosys are no exception to this.

Like all IT stocks, eClerx Services is also one of the beaten down stocks.

eClerx touched its 52-week high price of Rs 2,970 on 13 January 2022. Its 52-week low was Rs 1,769.1 on 25 October 2021.

eClerx is currently trading at a PE (price to earnings) multiple of 17.1 times.

About eClerx Services

eClerx Services is an Indian IT consulting and outsourcing multinational company based in Mumbai and Pune engaged in providing solutions to Fortune 500 companies regarding their business process management, automation, and analytics services.

To know more about eClerx services check its factsheet and its quarterly results.

You can also compare eClerx with its peers.

eClerx Services vs Info Edge

eClerx Services vs Firstsource Solutions

Stay tuned to Equitymaster to know more about corporate actions.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...