Radhakishan Damani's Long-Standing Dividend Stock to Trade Ex-Bonus Soon

In today's world, it's not enough to just have a full-time job; many people are looking for ways to earn extra income.

Wouldn't it be great if you could increase your income without putting in extra effort? That's the ideal situation for everyone.

We all love freebies. Whether it's getting an extra pack of cookies with a "Buy one, Get one" deal or looking forward to a Diwali bonus at work, the thrill of receiving something extra without paying more is universal.

In the stock market, these freebies are called bonus shares.

Bonus shares are additional shares that shareholders receive for free based on the shares they already own.

For investors seeking such perks, Radhakishan Damani-backed VST Industries is set to trade ex-bonus shortly.

Here's all you need to know.

• VST Industries announced bonus shares on 26 July 2024.
• The company will issue bonus shares in a ratio of 10:1. This means ten new bonus equity shares of Rs 10 each for every one existing equity share of Rs 10 each fully paid up.
• Total number of securities proposed to be issued is at 154,419,200 equity shares.
• The record date for the same is 30 August 2024.
• This is the first time the company has announced a bonus. Before this, the company has not carried out any major corporate actions.

The decision is aimed at improving the liquidity and allowing for broader base participation of shareholders in the company. This shall also facilitate the strategic restructuring plans.

Radhakishan Damani's Holding

Radhakishan Damani, through his entity Derive Trading, on 24 July 2024 offloaded a partial stake in tobacco company VST Industries through bulk deals.

According to exchange data, Damani sold about 2.62 lakh shares or about 1.7% stake in the company at Rs 4,102 apiece. This takes the transaction value to Rs 1.1 bn.

Among the public shareholders, Damani held about 34.7% of the company. Damani raised its stake in VST Industries during the June quarter by 2%.

At the end of the March 2024 quarter, the investor had held about 32.7% of the company.

A Close Look at Financials

VST Industries has shown a consistent increase in its net sales over the three years, with sales rising from Rs 7,957 million (m) in FY22 to Rs 10,034 m in FY24, at a compound annualised growth rate (CAGR) of 12.3%.

Despite the increase in sales, the operating profit has remained relatively stagnant, fluctuating slightly around Rs 4,583 m in FY22 to Rs 4,328 m in FY24.

This suggests that while the company has been able to increase its top line, it has struggled to translate this into proportional increases in operating profit.

The operating margin has seen a gradual decline from 0.6% in FY22 to 0.4% in FY24.

Net profit has followed a similar trend as the operating profit, showing a slight increase from Rs 3,202 m in FY22 to Rs 3,270 m in FY23, followed by a decline to Rs 3,016 m in FY24. Over the past three years, the company's net profit showed a degrowth of CAGR of 3%.

The net profit margin has declined sharply from 40.2% in FY22 to 30.1% in FY24.

VST Industries Snapshot (FY22-24)

(Rs m, Consolidated)	FY22	FY23	FY24
Net Sales	7,957	9,124	10,034
Growth (%)	-	14.7	9.9
Operating Profit	4,583	4,591	4,328
Operating Margin (%)	0.6	0.5	0.4
Net Profit	3,202	3,270	3,016
Net Profit Margin (%)	40.2	35.8	30.1

Source: Equitymaster

What Next?

Looking ahead, VST Industries is well-positioned to continue its growth trajectory.

The cigarette industry in India is characterised by high entry barriers, which have allowed only a few players to dominate the organised market.

One significant barrier is the government's ban on FDI in the cigarette sector, effectively limiting competition from large foreign firms.

VST has strategically focused on a niche segment, catering primarily to rural consumers seeking affordable cigarettes.

This approach has helped the company avoid direct competition with giants like ITC and Godfrey Phillips, whose brands target premium urban consumers.

VST's portfolio, including brands like Charminar, Charms, Special, Moments, Total, and Editions, remains robust in rural markets. The company's stronghold in this segment has been a key driver of its sustained growth.

Additionally, the broader tobacco industry in India has consistently shown remarkable growth, with companies reaping substantial profits.

With the industry expected to grow at a compound annual growth rate (CAGR) of around 12% by 2028, VST is well-positioned to capitalise on this expansion and further strengthen its market position.

How VST Industries Shares have Performed Recently

VST Industries shares have fallen more than 7% in past month. Over the past six months, the company's shares have gained 15%.

In 2024 so far, the shares of the company are trading 25% higher.

VST Industries touched its 52-week high of Rs 4,849.8 on 19 July 2024 while it touched a 52-week low of Rs 3,159 on 26 October 2023.

About VST Industries

VST Industries is engaged in manufacture of cigarettes containing tobacco and unmanufactured tobacco.

Founded in the year 1930, VST Industries got its name through its founder Vazir Sultan. It's the third-largest player in the Indian cigarette market with over 90 years of operations.

The company has a portfolio of reputed brands and it sells cigarettes in India and abroad under different brands including Charminar, Charms, Special, Moments, Total, and Editions.

The market share of VST Industries stands at 9% in the legal cigarette market and 5% in the overall cigarette market in terms of value.

For more details about the company, you can have a look at VST Industries' factsheet and quarterly results on our website.

You can also compare VST Industries with its peers.

VST Industries vs Godfrey Phillips

VST Industries vs ITC

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