This Multibagger Smallcap Stock Zooms 10% ahead of Bonus Issue

What equals the feeling of buying good quality healthy vegetables at reasonable prices? The feeling of getting coriander and curry leaves for free!

And what equals the feeling of getting a good quality small-cap stock at a reasonable price? The feeling of getting bonus shares.

Shareholders of Pondy Oxides and Chemicals must have felt this when the company declared a bonus.

Pondy Oxides and Chemical's share price has performed very well on the bourses even when the benchmark Sensex was beaten down.

Take a look at the comparison chart below.

Rs 100 Invested in Pondy Oxides Vs Sensex

Data Source: Equitymaster

Hence, when the board of Pondy Oxides declared a bonus after a long time, the shareholders were overjoyed.

Today, shares of the company soared over 10%. Gains of 10% at a time when the entire market plunged and benchmark indices fell over 2%.

Let's talk about the bonus issue in detail.

• Pondy Oxides and Chemicals announced a bonus on 10 August 2022.
• The bonus ratio is 1:1. This means one bonus share will be issued for one share held by investors.
• The bonus record date is 29 September 2022, one month from today. The share will trade ex-bonus on 28 September 2022.

Pondy Oxides and Chemicals has declared a bonus issue after a long time. The last time it declared a bonus was in 2006.

A look at the company's financials

Pondy Oxides and Chemicals has given multibagger returns on the bourses, but its financials paint an unclear picture.

The revenues dropped massively in one financial year and rose massively in the other.

The profit margins are also very low. In the financial year 2019-20, the sales have increased by 4% and yet the margins have dropped.

However, the overall picture is good. In the past 5 years, total revenues have increased by 14% and the net profit margin has increased by 8%.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	9,417	10,529	12,234	10,076	14,594
Growth	24%	12%	16%	-18%	45%
Operating profit	600	687	397	276	818
Operating profit margin	6%	7%	3%	3%	6%
Net profit	292	337	163	108	482
Net profit margin	3%	3%	1%	1%	3%

Data Source: Equitymaster

Also, one of the top investing gurus of India, Dolly Khanna, has this stock in her portfolio.

The June 2022 shareholding pattern of Pondy Oxide shows that Dolly Khanna holds 3.91% stake or 227,252 shares of the company.

How shares of Pondy Oxides and Chemicals have performed recently

Pondy Oxides and Chemicals rose around 107% in the past one year. On a YTD basis, the share price has gone up by 90%.

If you had invested Rs 1 m in Pondy Oxides and Chemicals a year ago, then today it would be Rs 2.1 m!

Pondy Oxides and Chemicals share price touched its 52-week high price of Rs 929.6 on 19 April 2022. Its 52-week low was Rs 403.0 touched on 21 September 2021.

Pondy Oxides and Chemicals is currently trading at a PE (price to earnings) multiple of 9.1 times.

About Pondy Oxides and Chemicals

Pondy Oxides & Chemicals Ltd. manufactures metal oxides and plastic additives. The company produces zinc oxide, lead sub oxide, litharge red lead, and liquid stabilizers of polyvinyl chloride (PVC).

Through a subsidiary, Pondy manufactures epoxy oil stabilisers and paint driers. Pondy Oxides and Chemicals is a leading secondary lead smelter in India.

These products are provided to companies like those that make batteries, chemicals, and PVC extruded and moulded products.

For more details, check out Pondy Oxide and Chemical's factsheet and quarterly results.

Stay tuned to Equitymaster to know more about corporate actions.

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...