Bonus Shares Alert: This Smallcap Multibagger Stock to Issue Bonus Shares Soon

The travel and tourism industry in India has picked up rapid pace ever since serious Covid-19 fears went away.

People began going out like never before as revenge travel theme emerged and that's what being stuck in our homes for a long time could do.

Within the travel and tourism industry, the luggage industry has seen a speedy recover with people spending more on luxurious bag-packs and what not.

In India, the two stocks firmly holding a foothold in the luggage sector are Safari Industries and VIP Industries.

Safari Industries, one of the favourite stocks of ace investor Ashish Kacholia, has turned around big-time since the Covid slump. Since its Covid-19 lows, the stock has given multibagger returns of over 500%.

Recently, Safari Industries declared bonus shares and the stock is set to trade ex-bonus next week.

Bonus shares are free shares that shareholders receive against shares they currently hold.

Here's all you need to know.

• Safari Industries announced bonus shares on 1 November 2023.
• The company will issue bonus shares in a ratio of 1:1. This means one bonus share of Rs 2 each for every one existing fully paid-up equity shares of Rs 2 they own.
• The company will issue 23,783,607 equity shares not exceeding Rs 47.5 million (m).
• The record date for the same is 12 December 2023.

Interestingly, this is the first time the company has come out with a bonus issue.

Bonus issues tend to increase a company's share capital and liquidity while decreasing the stock price.

They are distributed out of profit reserves, free reserves, or securities premiums.

Post the bonus issue, the paid-up share capital, which now stands at Rs 47.5 m, will be around Rs 95.1 m.

A Close Look at Financials

For the September 2023 quarter, Safari Industries' revenue grew by 18% compared to last year's Rs 3.7 billion (bn), while it reported net profit growth of 53.7% year-on-year to Rs 398 m.

For FY23, the company recorded a total revenue of Rs 12.2 bn. Between FY19 and FY23, the company has posted a CAGR growth of 20.5% in its revenue.

The profit has followed a similar trend, though it did report a net loss of Rs 208.9 m in FY21. But overall, its profit has increased from Rs 272 m in FY19 to Rs 1.2 bn in FY23.

This growth was on the back of a dominating position in the mid-to-lower segment of the market.

Safari Industries Financial Snapshot (2019-23)

Particulars	31-Mar-19	31-Mar-20	31-Mar-21	31-Mar-22	31-Mar-23
Total Revenue (Rs in bn)	5.7	6.9	3.3	7.1	12.2
Growth (%)	-	21.1	-52	115.1	71.1
Operating profit margin (%)	7.9	7.4	-7	4.9	14.3
Net profit (Rs in m)	272	306.6	-208.9	223.6	1250.8
Net profit margin (%)	4.7	4.5	-6.4	3.3	10.3

Data Source: Equitymaster

The company has maintained consistent operating profit and net profit margins, except for FY21. In FY23, operating profit margin and net profit margins doubled, reaching 14.3% and 10.3%, respectively.

This substantial improvement can be attributed to a significant surge in its revenue, resulting in a reduction in operating expenses.

Going forward, the company aims to increase its revenue by 33% from FY22 to FY25.

Strategic Manufacturing Expansion Plan

The company is gearing up for a significant move, allocating funds of up to Rs 2.2 bn to establish an Integrated Greenfield Manufacturing unit.

This strategic initiative will be executed either through the company itself or via its wholly-owned subsidiary, Safari Manufacturing Limited.

To fulfil the financial needs of this venture, the board has given the green light to subscribe to the share capital of Safari Manufacturing Limited.

The approval has been granted for a sum of up to Rs 650 m. This capital injection is a crucial step towards meeting the expenditure requirements for the setup of the Integrated Greenfield Manufacturing unit.

What Next?

Presently, the company is active in 80 stores, and it has strategic plans to extend its presence to nearly 140 stores by the conclusion of the upcoming year.

To increase profitability by streamlining operations, the company plans to open four new retail locations every month.

The company plans to expand its premium product line, which will help increase its margin in the next two to three years.

By catering to the discerning needs of premium customers, the company aims to attract higher-value sales, which can significantly improve its profit margins.

How Shares of Safari Industries have Performed Recently

Over the last one year, the share price of Safari Industries has gained 145%. In 2023 so far, the stock is trading higher by 140%.

Over the six months, the stock has gained over 45%.

The company touched its 52-week high of Rs 4,630.0 on 21 November 2023 and its 52-week low of Rs 1,571.4 on 26 December 2022.

About Safari Industries

Safari Industries (India) Ltd was incorporated in 1980.

The company is engaged in the business of manufacturing and trading luggage and luggage accessories under the Safari brand.

The company manufactures its hard luggage using PolyPropylene (PP) and Polycarbonate (PC) at its manufacturing plant located in Halol, Gujarat.

The soft luggage is basically imported by the company and is made from a variety of fabrics.

For more details, see the Safari Industries company fact sheet and quarterly results.

Since small-cap stocks interest you, here's a proven approach on investing in small-cap stocks.

You can also compare Safari Industries with its peers:

Safari Industries vs VIP Industries

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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...