Bonus shares are additional shares that a company issues to its existing shareholders without any cost. The bonus shares are issued in proportion to the existing holdings of the shareholders. For example, if a company declares a 1:1 bonus, it means that the shareholders will get one bonus share for every share they own. Bonus shares are a way of rewarding the shareholders and increasing their shareholding in the company. Bonus shares also increase the liquidity and trading volume of the shares in the market.
Some of the companies that have announced or are expected to announce bonus shares in February 2024 are:
| Company Name | Bonus Ratio | Record Date | Ex-Date |
|---|---|---|---|
| Sonata Software Ltd | 1:1 | February 12, 2024 | February 11, 2024 |
| Safari Industries (India) Ltd | 1:1 | February 12, 2024 | February 11, 2024 |
| Avantel Ltd | 2:1 | February 10, 2024 | February 9, 2024 |
| Gensol Engineering Ltd | 2:1 | February 8, 2024 | February 7, 2024 |
| Newgen Software Technologies Ltd | 1:1 | February 5, 2024 | February 4, 2024 |
| Integra Essentia Ltd | 1:1 | February 4, 2024 | February 3, 2024 |
| M Lakhamsi Industries Ltd | 1:50 | February 3, 2024 | February 2, 2024 |
| Allcargo Logistics Ltd | 3:1 | February 2, 2024 | February 1, 2024 |
Bonus shares constitute a corporate action wherein a company distributes additional shares to its current shareholders without any additional charges. The bonus shares are issued from the accumulated profits or reserves of the company, which are converted into share capital. The bonus shares do not affect the total value of the company or the share price, but they increase the number of shares outstanding and the share capital. Bonus shares are also known as scrip dividends.
The main purpose of issuing bonus shares is to increase the confidence and loyalty of the shareholders and to make the shares more affordable and accessible to the investors. Bonus shares also indicate the positive financial performance and growth prospects of the company. Bonus shares can also help in reducing the tax liability of the shareholders, as they are not taxed as income but as capital gains.
A record date is the date on which the company determines the list of shareholders who are eligible to receive the bonus shares. The record date is usually announced along with the bonus ratio and the ex-date. The shareholders who own the shares of the company on or before the record date are entitled to receive the bonus shares in proportion to their holdings.
An ex-date is the date on which the shares of the company start trading without the entitlement of the bonus shares. The ex-date is usually one or two days before the record date. Investors who purchase a company's shares on or after the ex-date are not entitled to receive bonus shares. The share price of the company usually drops on the ex-date by the factor of the bonus ratio.
The eligibility of bonus shares depends on the record date fixed by the company. The shareholders who own the shares of the company on or before the record date are eligible to receive the bonus shares. The shareholders who sell the shares of the company on or before the record date are not eligible to receive the bonus shares. Investors who purchase a company's shares on or after the ex-date are not entitled to receive bonus shares.
There are two types of bonus share:
Fully Paid Bonus Share:These are the bonus shares that are issued to the shareholders at no cost. The company does not require any additional payment from the shareholders for these shares. The fully paid bonus shares are issued from the free reserves or accumulated profits of the company.
Partly Paid Bonus Share:These are the bonus shares that are issued at a discounted price to the shareholders. The company requires some additional payment from the shareholders for these shares. The partly paid bonus shares are issued from the share premium account or the capital redemption reserve of the company.
Some of the advantages of bonus shares are:
Bonus shares increase the shareholders' shareholding without any additional investment. This can help the shareholders earn more dividend income whenever the company declares a dividend.
Bonus shares increase the liquidity and trading volume of the shares in the market. This can help the shareholders sell their shares more easily and quickly if they need cash.
Bonus shares reduce the share price of the company and make it more affordable and attractive to investors. This can help the company attract more demand and capital for its shares.
Bonus shares indicate the financial strength and growth potential of the company. This can help the company enhance its reputation and goodwill among the shareholders and the public.
Bonus shares can help the company save tax, as the bonus shares are not taxed as dividends but as capital gains. The shareholders can also defer their tax liability by holding the bonus shares for a longer period.
Some of the disadvantages of bonus shares are:
Bonus shares do not increase the value of the company or the share price. The bonus shares are issued from the existing company funds, which are divided among more shares. The shareholders do not receive any additional value or benefit from the bonus shares.
Bonus shares dilute the earnings per share (EPS) of the company. The EPS is the ratio of the net profit of the company to the number of shares outstanding. The bonus shares increase the number of shares outstanding, which reduces the company's EPS.
Bonus shares may create a false impression of the profitability and performance of the company. The bonus shares may make the shareholders believe that the company is doing well and generating more profits, while the reality may be different. The bonus shares may also divert the attention of the shareholders from the fundamental aspects of the company.
The bonus issue of shares is a corporate action that involves issuing additional shares to the existing shareholders of a company at no extra cost. The bonus issue of shares is also known as bonus share or scrip dividend. The bonus issue of shares is a way of rewarding the shareholders and increasing their shareholding in the company.
The bonus issue of shares is usually announced by the company along with the bonus ratio, the record date, and the ex-date. The bonus ratio is the proportion of the bonus shares to the existing shares. The record date is the date on which the company determines the list of shareholders who are eligible to receive the bonus shares. The ex-date is the date on which the shares of the company start trading without the entitlement of the bonus shares.
Bonus shares constitute a corporate action wherein a company distributes additional shares to its current shareholders without any additional charges. Bonus shares are a way of rewarding the shareholders and increasing their shareholding in the company. Bonus shares also increase the liquidity and trading volume of the shares in the market.
Bonus shares indicate the financial strength and growth potential of the company. Bonus shares can also help the company and the shareholders save tax. However, bonus shares do not increase the value of the company or the share price. Bonus shares also dilute the earnings per share of the company. Bonus shares may also create a false impression of the profitability and performance of the company.
An ex-date is the date on which the shares of the company start trading without the entitlement of the bonus shares. Investors who purchase a company's shares on or after the ex-date are not entitled to receive bonus shares.
No, the issue of bonus shares does not enhance the company’s value or the share price. The bonus shares are issued from the existing company funds, which are divided among more shares. The shareholders do not receive any additional value or benefit from the bonus shares.
The eligibility of bonus shares depends on the record date fixed by the company. The shareholders who own the shares of the company on or before the record date are eligible to receive the bonus shares.
An example of a bonus issue is when a company declares a 1:1 bonus, which means that the shareholders will get one bonus share for every share they own. For instance, if a shareholder owns 100 shares of a company, he or she will get 100 bonus shares after the bonus issue.
The share price of the company usually falls after the bonus issue by the factor of the bonus ratio. This is because the bonus shares increase the number of shares outstanding, which reduces the value per share. The share price adjustment is done to maintain the market capitalisation of the company.
Yes, you can buy shares after the bonus announcement, but you will not be eligible to receive the bonus shares. The bonus shares are only given to the shareholders who own the shares of the company on or before the record date. The shares of the company start trading without the entitlement of the bonus shares on or after the ex-date.
OTP sent to your mobile number/email. Please enter it below to verify.
