Tata Investment, the NBFC giant of the Tata Group, skyrocketed by a whopping 10% on Tuesday, August 5, after it announced its first-ever stock split in the ratio of 1:10. Tata Investment shares are now nearing their 52-week high mark. A stock split generally means splitting the existing shares to improve liquidity and make them affordable for both new and existing investors. But does Tata Investment's stock split pass the checklist of ace investor Warren Buffett?
Tata Investment Share Price:
At the time of writing, Tata Investment stock traded at Rs 7621.50 apiece on BSE, rising by a whopping Rs 641 or 9.2% with a market cap of Rs 38,335.04 crore. The stock has gained by nearly 10% to hit an intraday high of Rs 7625 apiece. With that, the stock is nearing its 52-week high of Rs 8,075.90 apiece.
Tata Investment stock makes it one of the strongest single-day rallies in the past few months.
The performance comes after the company reported double-digit growth in its Q1FY26 profitability.
Tata Investment Q1 Results:
During Q1FY26, the company posted a net profit of Rs 146.30 crore, registering a growth of 11.6% from the net profit of Rs 131.07 crore in the same quarter a year ago.
On the top-line front, the company posted revenue from operations at Rs 145.46 crore in Q1FY26, which was up by 2.1% compared to Rs 142.46 crore revenue in Q1FY25.
But a major spark to the bull run in Tata Investment was led after the company declared its first-ever stock split decision.
Tata Investment Stock Split:
Tata Investment has declared a stock split ratio of 1:10. This will be its first stock split in history. The ratio of 1:10 implies that Tata Investment will split 1 existing equity share with a face value of Rs 10 each, into ten smaller shares with a face value of Re 1 each.
The reason behind the stock split is to enhance the liquidity of the Company's equity shares and to encourage participation of retail investors by making equity shares of the Company more affordable.
Tentatively, the company aims to complete the stock split plan within 2 months from the date of approval of shareholders of the company and regulatory or statutory approvals.
The Impacts Of Stock Split:
In general terms, the stock split ratio reduces the share price value of the listed company on the exchanges, depending on the ratio.
Further, the face value of a stock price also gets adjusted lower as per the proportion of the split.
Also, the ClearTax report highlighted that a stock split does not alter the company's market capitalisation or the value of an investor's holdings. It redistributes the same equity into more shares. Unlike issuing new shares (which dilutes ownership), a stock split maintains the existing shareholders' proportional value.
Let's test it with an example: For instance, if you hold 100 shares of Tata Investment at Rs 7,500 per share at face value of Rs 10 each. Then at a 1:10 ratio, the number of shares multiply to 1,000 shares. While the share price value will reduce to Rs 750 per share, as the face value is trimmed from Rs 10 to Re 1.
However, 100 shares X Rs 7500 = Rs 7,50,000 investment value.
Similarly, 1000 shares x Rs 750 = Rs 7,50,000.
Hence, there will be no immediate growth in wealth when a stock is splitting. The portfolio of the investor will be adjusted to the split ratio, meaning the number of shares will go up but the share price value will fall down.
The fresh growth emerges over the time after the stock split.
Does Tata Investment's Stock Split Pass Warren Buffett's CheckList?
The Oracle Of Omaha's largest wealth-creating stock is his Berkshire Hathaway. However, his Berkshire traded in two patterns. There is Berkshire Hathaway Class A shares and Berkshire Hathaway Class B shares.
Buffett holds many stocks that have undergone stock splits and issued both dividends and bonuses. His Berkshire Hathaway Class B shares have also undergone one stock split in the ratio of 1:50 in 2010. But there is one stock that he holds that has never undergone either a split or a bonus.
It is none other than Berkshire Hathaway's Class A shares. Currently, the Class A stock is at $692,600. In Indian rupees, that is Rs 6.08 crore per share. Class A shares have recorded an all-time gains of 266,284.61%. Once upon a time, Class A shares were merely around $260 apiece in the start of January 1980.
Why Buffett has never allowed a stock split for Class A stock? According to Investopedia, simply put, Buffett focuses on high-quality companies with long-term growth and profit potential. And by refusing to split Berkshire Hathaway's Class A stock shares, Buffett seeks to attract investors after his own heart-namely, those interested in long-term plays who have extended investment horizons.
In Buffett's view, the advantages of abstaining from a stock split outweigh the disadvantages of the stock's high price per share. Although the price tag may be a limitation for many investors, Buffett believes that it actually incentivizes the types of investors that Berkshire hopes to attract-those with a long investment horizon that are interested in growing intrinsic value rather than simply capitalizing on the volatility associated with lower-priced stocks, as per Investopedia.
So, does Tata Investment's stock split ratio passes Warren Buffett's check list? Its up to you to decide!
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author, GoodReturns.In nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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