10 Companies that Should do a Stock Split in 2023 (but Probably Won't)

I have a confession to make...

When I first started investing in the stock market, I would often choose to buy a stock which was lower priced over a higher priced stock.

Investors, especially beginners are often drawn towards buying stocks which are relatively low priced and tend to stay away from higher priced stocks.

But as Albert Einstein once said, "The only source of knowledge is experience."

As investors including yours truly learn with experience, in reality, it is not the price, but rather the value of stocks that should matter.

So why is that most retail investors prefer lower priced stocks?

Simply, because as an investor, one feels a sense of satisfaction and pride buying a larger quantity of shares, say 10,000 shares of Vodafone Idea trading at Rs 9 as compared to buying just 1 share of MRF at Rs 90,000.

And then, there is also a wrong notion that a lot of investors have that a stock priced at Rs 10 has a higher probability of doubling or tripling as compared to a stock priced at Rs 1,000.

But again, that may not hold true. Once again let's take the example of Vodafone and MRF.

In December 2012, shares of Vodafone traded close to Rs 100, whereas MRF traded at just above Rs 12,000 levels.

Since then, MRF is up over 7.5x whereas Vodafone has lost over 92% of its value.

Value investing is a broader philosophy that involves buying a company at a price that is lower than its intrinsic value.

Hence, while investing in stocks, it is wise to keep an eye not just on price but also on the value of the stocks.

For instance, the stock of Shree Cement Ltd trades close to Rs 25,000 levels whereas Ambuja Cements Ltd is currently priced at under Rs 600.

For a layman, it seems that Shree Cements is highly over priced as compared to Ambuja Cements?

But, on a closer look we realise that the valuations are perfectly justified if we compare the financials of both companies.

FY 2022 (In Rs billion)	Shree Cement Ltd	Ambuja Cement Ltd
Revenue	143.1	139.6
Net Profit	23.8	20.8
Market Cap	877	1,165
Price to Earnings Ratio	53.4	59.8
Price to Book Ratio	4.9	5.1

Source: Equitymaster

Although the price of shares is determined by the forces of demand and supply on a day-to-day basis, fundamentally, it is also a function of the total number of shares issued by a company.

In case of Shree Cements Ltd, the company has 36 million (m) equity shares issued and available for trade. On the other hand, Ambuja Cements has issued a total of 1.9 billion (bn) equity shares.

Over the years, Ambuja Cement has declared four bonus issues and split its shares once from a face value of Rs 10 to Rs 2. All of this has resulted in the number of shares significantly increasing to the present outstanding of 1.9 bn shares.

Shree Cements has chosen to not issue any bonuses nor has it ever announced a stock split.

There could be various reasons why a company may not choose to split its stock.

A company could choose to keep its share price high to keep the stock concentrated in the hands of a few shareholders, usually the promoters.

Higher prices also help in checking the price volatility of shares as it would keep retail investors and day traders away.

Shares trading at a higher price are difficult to buy or sell which allows promoters to retain significant voting rights in their hands, allowing them to make critical decisions without much interference.

And then of course there is the matter of pride... some promoters might believe that a high share price might enhance the reputation of their company.

So, should a company allow its shares to trade at high prices or split its shares?

There is no definitive answer for this question as there is no evidence that suggests that a stock split is the right thing to do, nor are there any SEBI regulations for splitting of shares.

Investors have the option to buy even one share of a company, if they choose to.

Here is the list of 10 companies that should do a stock split in 2023 but probably won't!

1. MRF Ltd

Madras Rubber Factory, commonly known as MRF Tyres, is an Indian Multinational tyre manufacturing company.

The company is the largest tyre manufacturer in India and accounts for about 25% of the total tyre sales in the country.

MRF has a total of 4.2 m shares outstanding of which the promoters hold 27.8% in the company as on date.

In 1970 and 1975, MRF offered a bonus in the ratio of 1:2 and 3:10 respectively. But there have been no share splits.

MRF Ltd
FY 2022	(In Rupees)
Revenue (Crore)	18,989.5
Net Profit (Crore)	647.3
Face Value	10.0
EPS	1,526.3
P/E	71.8
P/B	2.7
Equity	4,24,00,000.0
No of Shares Issued	42,40,000.0
Current Market Price	91,150.0
Current Market Cap (Crore)	38,645.0

Source: Equitymaster

For the year ended 31 March 2022, the company reported sales of Rs 189 bn and PAT of Rs 6.4 bn. With its tiny equity capital of just Rs 42 m, this resulted in an eye-popping earnings per share (EPS) of Rs 1,526.

Even though the stock has always been high priced, it has still delivered a return of 640% over the last 10 years which proves that a high-priced stock can still be an outperformer if the valuations are justified.

Interestingly, due to its high price, the average quantity of shares traded per day on BSE stands at just 1,482 with average number of trades at 885.

This works out to an average of just 1.6 shares (essentially 1 or 2 shares) bought and sold per trade! Such are the quirks of being the most expensive stock traded in India.

2. Page Industries Ltd

Page Industries Ltd is a manufacturer and retailer of innerwear, leisurewear and socks and the exclusive licensee of Jockey International in India, Sri Lanka, Nepal, Bangladesh, the United Arab Emirates, Oman, Qatar, Maldives, and Bhutan.

Page Industries is also the exclusive licensee of Speedo International Ltd. for the manufacture, marketing, and distribution of the Speedo brand in India.

The stock has come a long way since its initial public offer (IPO) price of Rs 395 per share in March 2007 and currently trades at Rs 46,700 per share, a massive gain of 11,700% over the last 15 years.

Page Industries Ltd
FY 2022	(In Rupees)
Revenue (Crore)	3,886.5
Net Profit (Crore)	536.5
Face Value	10.0
EPS	481.0
P/E	70.5
P/B	39.3
Equity	11,15,38,740
No of Shares Issued	1,11,53,874
Current Market Price	46,700.0
Current Market Cap (Crore)	52,088.0

Source: Equitymaster

Revenue grew 37% to Rs 38.8 bn and net profit jumped 58% to Rs 5.3 bn for the financial year ended 31 March 2022.

The promoters hold 46.1% stake in the company whereas retail investors hold only 7.2% of the total capital.

The stock has been on a tear generating 1,257% return over the last 10 years for its shareholders.

On an average, 682 shares of the company were traded on the BSE per day since the beginning of the year.

3. Honeywell Automation India Ltd

Honeywell Automation was incorporated in India in 1984 and is a leader in providing integrated automation and software solutions, including process solutions, and building solutions.

Honeywell Automation employs close to 13,000 people across locations, including Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune.

The stock has climbed from Rs 100 in January 1999 to the current market price of Rs 42,840, representing a multi-bagger return of 42,740%.

An investment of Rs 10,000 made in this stock in 1999 would have grown to Rs 4,284,000 today.

Honeywell Automation India Ltd
FY 2022	(In Rupees)
Revenue (Crore)	2,948.3
Net Profit (Crore)	339.1
Face Value	10.0
EPS	383.5
P/E	100.4
P/B	12.9
Equity	8,84,15,230.0
No of Shares Issued	88,41,523.0
Current Market Price	42,840.0
Current Market Cap (Crore)	37,878.0

Source: Equitymaster

The company reported a net profit of Rs 3.3 bn for the financial year 2022 as opposed to Rs 4.6 bn for FY2021. Revenue declined 3% year over year to Rs 29.4 bn from Rs 30.4 bn in the previous year.

The stock which touched it's lifetime high of Rs 49,799 on 12 March, 2021 on BSE declined thereafter losing 39% to Rs 30,460 over the next fourteen months.

Since then, the stock has recovered and is currently trading at levels just under Rs 43,000.

As the price has risen, as expected the number of shares traded per day has declined equally dramatically.

In 2012, at an average price of Rs 2,564, on an average 4,461 shares were traded per day on BSE. In 2022, as the price per share has risen to over Rs 42,000, the average shares traded per day has declined to just 304.

4. Shree Cement Ltd

Shree Cement Limited is one of India's top cement producers with an installed capacity of 43.4 m tonnes per annum in India and 50.4 m tonnes including overseas.

The company caters to markets across India and the Middle East with 4 integrated plants in India, one in UAE and nine grinding units.

With a power generation capacity of 752 megawatts, it also produces and sells power under the name Shree Power and Shree Mega Power.

Shree Cement has a total of 36 m shares outstanding of which the promoters hold 62.5% in the company as on date.

Even though the stock trades above Rs 24,000, the company has never announced a bonus or split since its listing in 1984.

Shree Cement Ltd
FY 2022	(In Rupees)
Revenue (Crore)	14,305.8
Net Profit (Crore)	2,376.6
Face Value	10.0
EPS	658.7
P/E	53.3
P/B	4.9
Equity	36,08,07,480.0
No of Shares Issued	3,60,80,748.0
Current Market Price	24,170.0
Current Market Cap (Crore)	87,200.0

Source: Equitymaster

For the financial year ended 2022, the company reported revenue of Rs 143 bn and net profit of Rs 23.7 bn on an equity capital of Rs 360 m.

The stock has rewarded its shareholders well and given a CAGR of 18.8% over the last 10 years.

However, the year 2022 has been very volatile for the stock as it has swung in a wide range between Rs 18,000 and Rs 27,500. Currently, the stock trades at just above Rs 24,000 levels.

5. 3M India Ltd

3M India Ltd a subsidiary of 3M Co, an American multinational conglomerate.

The company caters to the automotive, electronics, healthcare, energy, and manufacturing industries among others.

Scotch-Brite, Scotch, Nexcare, Command, Littmann, and Post-it are a few of its well-known brands.

3M India Ltd has been listed on the exchanges since 1991 and the company's revenues and profits have grown leaps and bounds over the years.

And along with its strong balance sheet, the stock price has also risen from under Rs 100 in 1991 to the current market price of Rs 23,250.

3M India Ltd
FY 2022	(In Rupees)
Revenue (Crore)	3,078.3
Net Profit (Crore)	266.1
Face Value	10.0
EPS	236.2
P/E	74.1
P/B	9.8
Equity	11,26,50,700.0
No of Shares Issued	1,12,65,070.0
Current Market Price	23,267.0
Current Market Cap (Crore)	26,210.0

Source: Equitymaster

The company has 11.2 m shares outstanding of which 75% are held by its promoters.

Shares of 3M India Ltd have given a CAGR of 19.2% over the last 10 years. In November, 2022 the company declared a special dividend of Rs 850 per share to reward its shareholders.

6. Abbott India Ltd

Abbott India Limited is part of Abbott Laboratories, an American multinational medical devices and health care company.

The company has been present in India since 1910 and has a diverse range of science-based nutritional products, diagnostic tools, branded generic pharmaceuticals, and diabetes and vascular devices.

Since its listing in 1977, the company declared seven bonuses until 1998 and yet the current market price hovers close to Rs 21,000 levels making it one of the most expensive stocks in India.

Abbot India Ltd
FY 2022	(In Rupees)
Revenue (Crore)	4,919.2
Net Profit (Crore)	798.7
Face Value	10.0
EPS	375.8
P/E	50.1
P/B	16.2
Equity	21,25,00,000.0
No of Shares Issued	2,12,50,000.0
Current Market Price	20,815.0
Current Market Cap (Crore)	44,231.0

Source: Equitymaster

The company has 21.2 m outstanding shares of which the promoters hold 74.9%

Over the last 10 years, the share price of Abbot India has risen 1,328% making it one of the best performing pharma stocks in India.

7. Nestle India Ltd

Nestle India Limited is the subsidiary of Nestle, the world's largest food and beverage company.

With over 100 years association with India, today, the company has presence across India with 8 manufacturing facilities and four branch offices.

Nestle's brand, Maggi is synonymous with snacking in India and one of the most recognised brands in the country.

Nestle India Ltd
FY 2022	(In Rupees)
Revenue (Crore)	14,709.0
Net Profit (Crore)	2,144.8
Face Value	10.0
EPS	222.4
P/E	90.8
P/B	84.4
Equity	96,41,57,160.0
No of Shares Issued	9,64,15,716.0
Current Market Price	20,390.0
Current Market Cap (Crore)	1,96,613.0

Source: Equitymaster

Nestle has declared 5 bonuses since its listing, with its last bonus declared in 1996. However, the company has resisted any stock split issuance till date hence keeping its share price out of reach of most small-time investors.

Of the 96.4 m shares outstanding, the promoters hold 62.7% whereas retail investors hold only 9.5%.

The stock has been a consistent performer and is up 321% since December 2012.

8. Bosch Ltd

Bosch Ltd is a leading supplier of technology and services in the areas of Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology.

Bosch offers home appliances, products for industry and comprehensive expertise in vehicle technology with hardware, software, and services to offer complete mobility solutions.

The company set-up its manufacturing operation in 1951 in India, which has grown over the years to include sixteen manufacturing sites, and seven development centres.

Bosch Ltd
FY 2022	(In Rupees)
Revenue (Crore)	11,781.6
Net Profit (Crore)	1,217.2
Face Value	10.0
EPS	412.7
P/E	40.0
P/B	4.8
Equity	29,49,36,400.0
No of Shares Issued	2,94,93,640.0
Current Market Price	17,600.0
Current Market Cap (Crore)	51,929.0

Source: Equitymaster

Bosch is only one of two companies on our list which has actually split its shares once, from a face value of Rs 100 to Rs 10 in 2004. The company has also declared 4 bonus issues since its listing.

Had the company not split its shares, MRF would have lost its title as the most expensive stock of India by a mile.

Bosch Ltd would be crowned king with a mind-boggling price of Rs 176,000 per share!

The company has 29.4 m outstanding shares. The promoters holding 70.5% of the shares while retail investors hold a miniscule 7% stake in the company.

After peaking in March 2015 where the stock traded above Rs 27,000 levels, the stock has been unable to cross the highs and over the last seven years gradually declined.

Even then, an investment of Rs 10,000 in shares of Bosch in December, 2002 would be valued at Rs 567,742, a CAGR of 22.3%

9. Proctor & Gamble Hygiene & Health Care Ltd (P&G)

P&G was founded over 180 years ago as a soap and candle company and is today one of the largest consumer goods companies in the world.

In India, P&G's history started in 1964 and today its portfolio includes leading and trusted brands like Ariel, Gillette, Head & Shoulders, Oral-B, Pampers, Pantene, Tide, Vicks, and Whisper.

P & G Ltd
FY 2022	(In Rupees)
Revenue (Crore)	3,900.9
Net Profit (Crore)	575.7
Face Value	10.0
EPS	177.3
P/E	90.0
P/B	62.4
Equity	32,46,07,360.0
No of Shares Issued	3,24,60,736.0
Current Market Price	14,160.0
Current Market Cap (Crore)	45,990.0

Source: Equitymaster

P&G has declared 5 bonuses between 1981 and 2003 but has never chosen to split its shares since listing which has allowed the stock price to climb higher over the years.

Like most other companies on our list with foreign promoters, the bulk of the equity is held by promoters, in this case, the promoters stake stands at 70.6% with retail investors barely making up 10% of the capital.

The stock of P&G has given its shareholders a CAGR of 19.7% over the last 20 years.

10. Lakshmi Machine Works Ltd

Lakshmi Machine Works Limited (LMW), one of only three companies in the world to produce the whole spectrum of spinning machinery, is a leading manufacturer of textile machinery in India.

LMW was established in 1962 in Coimbatore and today in addition to serving the domestic market, also exports goods to Asia, Australia, New Zealand, and New Guinea.

LMW has 60% market share in the domestic textile spinning machinery industry and is a brand leader in manufacturing customized products.

The company has declared 2 bonuses in 1989 and 1997 and is the second stock on our list to have split its shares from a face value of Rs 100 to Rs 10 in 2006.

Lakshmi Machine Works Ltd
FY 2022	(In Rupees)
Revenue (Crore)	3,071.5
Net Profit (Crore)	179.6
Face Value	10.0
EPS	168.1
P/E	48.1
P/B	6.9
Equity	10,68,00,000.0
No of Shares Issued	1,06,80,000.0
Current Market Price	13,620.0
Current Market Cap (Crore)	14,551.0

Source: Equitymaster

The company has only 10.06 m shares outstanding of which 31.1% are held by its promoters.

Shareholders of LMW have been rewarded with a phenomenal CAGR of 27.6% over the last 20 years.

The stock has had a stellar run from its lows of Rs 2,124 on 24 March, 2020 and jumped 541% till date making it a multi-bagger stock.

This is Earth Calling... Any Plans to Come Down in 2023?

Many companies offer a split of shares to make them more affordable to investors.

In fact, stock splits have been a rage in 2022 with the world's most valuable companies announcing massive splits.

Amazon completed its first split in more than a decade with a 20:1 split which resulted in the price changing from US$2,785 to US$139, hence allowing more participation for investors in the retail behemoth.

Google-parent Alphabet completed a 20-for-one stock split for its shares in mid-July as well. The split reduced its price per share from US$2,235.55 to US$111.77 bringing cheer to wall street investors.

Tesla also completed a 3-for-1 split in August, 2022. In 2020, the most valuable company, Apple had also split its shares on a 4:1 basis.

Of course, these stock prices had reached astronomical levels and the split was justified to ensure maximum retail participation.

At times, however, there may not be any visible logic for a stock split.

For instance, back home, this year, Dev Information Technology Ltd announced a stock split from Rs 10 to Rs 5 per share.

This resulted in the stock price halving from Rs 230 to Rs 115, which in effect doesn't seem to make much of a difference.

So will any of the companies on our list finally split their shares in 2023? After all, they are highly priced and a split would allow a lot more participation from Dalal street investors.

It seems unlikely... here's why.

Barring MRF and Lakshmi Machine Works, the average promoter holding in most companies stands above 70%

Further, six of the ten companies on our list have foreign promoters for whom there is no incentive to increase trading volumes in their stocks.

All these companies have outperformed the broader markets over the years with their strong fundamentals. Hence, they would not feel the need to bring in a greater number of shareholders to drive volumes or their stock prices.

Stock splits do not alter the financial fundamentals of a company. The ratios don't change, and the value of share capital also remains the same. So, a split doesn't provide any benefit to these companies.

On the contrary, these companies would prefer to keep a smaller investor base so that majority of voting rights remain within the company allowing them to make strategic decisions without any conflict.

Keeping prices higher also decreases volatility in the stocks hence lowering chances of any hostile takeovers or acquisitions.

Finally, who doesn't want to retain their uniqueness. After all, being among the top ten most expensive stocks in India is a matter of great prestige!

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...