Bank of Baroda shareholders richer after issuance of bonus shares

Bonus issue of shares refers to a company allocating additional shares from earnings or existing reserves to stockholders.

Bank of Baroda Uganda Limited has announced the issue of bonus shares to its investors. This follows the approval of the listing of additional 12,500,000,000 ordinary shares of par value of Shs10 on the Official List by the Uganda Securities Exchange (USE).

Announcing the issuance Monday morning at the USE in Nakawa, Shashi Shar the Managing Director of Bank of Baroda Uganda Limited noted that the issued shares have simultaneously been credited in the demat accounts of all shareholders.

“This is how all the shareholders have become richer by five times. Their wealth which was one share has increased to six that is five additional shares that have been issued,” he said.

“For the bank, it is a momentous occasion that we have compiled the increase in the bank’s authorized capital norms as stipulated by the Central Bank. We had time until 2024 but we have done it well ahead of the deadline,” he added.

The Central Bank requires commercial banks to raise capital of at least Shs150 billion by June 2024.

Bonus issue of shares refers to a company allocating additional shares from earnings or existing reserves to stockholders. A bonus issue increases a company’s outstanding shares but not it’s market capitalization, as the stock price adjusts proportionally to the additional shares issued.

Paul Biswo, the Chief Executive Officer at USE, has welcomed the development, noting it will boost trading on the bourse.

“What that means is that we have an extra 12.5 billion shares on the market and that has created liquidity. Investors on the market are able to sell those shares if they need to cash in because a bonus issuance is capitalization of retain earnings so indirectly the company has paid shareholders a return on investment,” he said.

Shares in the Bank were trading at Shs64.38 as the announcement was made.

The issuance comes after it was announced shareholders would receive Ugx 2 as a dividend per share for the year ending December 2022.

According to Shashi, the bonus issue of shares will also benefit new investors in the bank.

“Earlier, there were fewer number of shares available in the market. Now there are more shares in the hands of retailers and shareholders. So these retailing shareholders may want to sell to the market, leading to many people becoming shareholders,” he said.

On the 14th November 2002, Bank of Baroda (Uganda) Ltd shares were officially listed on the USE making Bank of Baroda the first financial institution to list their shares on the USE.

Their IPO of September 2002 was 16.7% oversubscribed and the initial trading of the share saw the price rise from Ugx 600 to Ugx 715 per share representing a 20% increase.

Bank of Baroda (U) Ltd is a subsidiary of Bank of Baroda, India, one of the leading Banks in Asia with over 2,750 branches in seventeen countries. It has been operating in Uganda since 1953.

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