NTPC trades ex-bonus debentures; stock falls over 8%

MUMBAI: Shares of NTPC plunged over 8 per cent in intraday trade as the stock trades ex-bonus debenture. The state-owned power company is giving one bonus debenture for every share held. The stock closed 6.25 per cent down or Rs 9.70 at Rs 145.5.

According to a market analyst, NTPC investors stand to earn tax free dividend from equity shares and also interest on debentures p.a.

For every share held, an investor will be allotted a bonus debenture which will have a face value of Rs 12.50 per share. The coupon rate payable on the debenture will be decided each year.

As per the formula, it will be an average price of the 10-year government bond for 5 working days before the record date plus 50 basis points. Currently, the 10-year government bond trades at a yield of 7.7 per cent.

The bonus debenture will be redeemed in three instalments with Rs 2.5 in the 8th year, Rs 5 in the 9th year and Rs 5 in the 10th year, respectively. Based on conservative calculations for a 10-year period, investors could earn a return of 9.21% every year if the share price moves to Rs 300.