Coforge stock split in 1:5 ratio: Why it looks like sharp fall today

Coforge implemented a 1:5 stock split on June 4, reducing the face value from Rs 10 to Rs 2 per share. This action aims to increase affordability and liquidity, attracting more retail investors.

Shares of midcap IT company Coforge Ltd on Wednesday (June 4) reflected an apparent sharp fall of nearly 80% as the stock traded ex-split, following its first stock split since listing in August 2004. The seeming decline was not due to market weakness but the result of a 1:5 stock split, aimed at improving affordability and liquidity.

Coforge's equity shares of Rs 10 face value were subdivided into five shares of Rs 2 each. This corporate action ensures all eligible shareholders—those who held shares as of the record date, June 4—receive five shares for every one they previously owned. The adjusted shares began trading on stock exchanges today.

The stock opened at Rs 1,720.05, sharply lower than Tuesday's close of Rs 8,499.5, marking the adjusted price post-split. At the opening bell, the stock was slightly up at Rs 1,710, registering a 0.60% gain.

This strategic move is expected to boost retail participation in the stock, as lower per-share prices make it more accessible to a broader investor base. The company, in a filing dated May 5, had notified the exchanges about the record date for the share split.

Q4 results and outlook:

In its Q4FY25 results, Coforge reported a 34% YoY jump in consolidated net profit, amounting to Rs 261.2 crore. However, revenue at Rs 3,409.9 crore missed analyst expectations, while operating margin came in at 13.2%. The board declared an interim dividend of Rs 19 per share.

Analysts offered mixed reactions to the results and stock performance:

• InCred Equities noted a revenue miss but better-than-expected EBIT margin, driven by strong order intake. It upgraded Coforge to a 'Hold' rating from 'Reduce', revising the target price to Rs 8,006 (pre-adjustment).
• Centrum Broking highlighted improvement in utilization (up 70 bps to 82%) and a decline in attrition (down 100 bps to 10.9%). The company added 10 new clients in Q4FY25, compared to 14 in the previous quarter.
• Choice Broking maintained a 'Buy' rating despite trimming its target price to Rs 10,765, citing strong long-term growth prospects driven by acquisitions and digital transformation deals.