Nestle stock split to make India's 6th highest priced stock affordable

One might argue that stock splits are nothing but sub-division of shares but consider the case of a small investor with a portfolio size of just Rs 1 lakh. Owning a single share of MRF would be out of question as the per share price is around Rs 1.3 lakh. And if she happens to want a pie of Maggie-maker Nestle India, buying just one share would make it 27% of the portfolio.

With January 5 as the record date, shares of the MNC FMCG firm will go ex-split in 1:10 ratio. This means that if you own 1 share of Nestle India as on the record date, the sub-division will leave you with 10 shares.

Last October, the company's board had approved splitting 1 share of face value of Rs 10 each into 10 shares of Re 1 face value each.


The stock had closed Wednesday's session at Rs 26,640.35 on BSE and is the sixth highest priced counter available on Dalal Street after MRF (about Rs 1.3 lakh), Page Industries (Rs 38,761), Honeywell Automation India (Rs 36,736), 3M India (34,271) and Shree Cement (Rs 28,179).



“Nestle's 1:10 stock split can have positive impacts on shares, including increased liquidity and higher trading volume. The split, by creating more shares at a lower per-share price, may attract more investors, especially small ones, potentially boosting demand for the stock. Overall, these factors can contribute to a more active and accessible market for Nestle's shares,” said Sunil Nyati, Managing Director of Swastika Investmart.

Unlike Wall Street where fractional ownership is allowed, the minimum ticket size for Dalal Street investors is one share.

This can potentially attract a larger number of retail investors who may find it more feasible to buy shares at a lower price, contributing to increased retail participation in the stock, analysts say.

The major advantage of a stock split is the increased liquidity in the counter due to lower share prices without affecting the balance sheet size, said Manish Chowdhury, Head of Research, StoxBox.

Assuming all things constant, the stock split will ideally not have any impact on the share price movement of Nestle, he said.

However, the company's overall value and shareholder ownership remain unchanged after the split, the long-term impact of which depends on factors like earnings growth and market sentiment.

Nestle technical outlook
In April 2023, Nestle India's stock experienced a breakthrough of a horizontal trendline, which was established by connecting the swing highs observed since August 2021. Following this breakout, the stock exhibited a robust upward rally, surging by approximately 38%.

“As the stock is trading near its all-time high level, all the moving averages and momentum indicators-based setups are suggesting bullish momentum in the medium to long-term. However, it has recently witnessed minor profit booking after touching the level of Rs 27,693 on 2nd January,” Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research, SBI Securities said.

In terms of pre-split price, the critical support zone for the stock lies in the range of Rs 26,400-26,300. “This zone represents a confluence of the 8-day EMA and the 38.2% Fibonacci retracement level calculated from the previous upward rally spanning from Rs 24220 to Rs 27693. On the upside, a sustainable breakthrough above the Rs 27300 level is anticipated to reignite the upward trajectory of the stock,” Shah said.

(You can now subscribe to our ETMarkets WhatsApp channel)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)