Bonus Issue

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Bonus Issue

Explanation: A Bonus Issue is when a company issues additional shares to its existing shareholders without receiving any additional payment. The bonus issue is typically in proportion to the shareholders’ current holdings, and it’s a way for the company to capitalize its profits.

In India, bonus issues are regulated by the Securities and Exchange Board of India (SEBI). Companies may issue bonus shares to reward existing shareholders without affecting the company’s cash position.

Example: Suppose TCS announces a 1:1 bonus issue. This means that for every share an existing shareholder holds, they will receive one additional share as a bonus. If an investor holds 100 shares before the bonus issue, they will receive an additional 100 shares without having to pay anything. The total number of shares held by the investor will then be 200.

Bonus issues are often seen as a way for companies to share their success with shareholders and increase liquidity in the market by making shares more affordable. However, the overall value of the investment remains the same for shareholders after the bonus issue, as the price per share adjusts accordingly.

Ex Date: In the context of a bonus issue, the Ex Date refers to the date on or after which the company’s shares are traded without the bonus entitlement. In simpler terms, it is the date on which the company’s shares start trading “ex-bonus.” Shareholders who buy the company’s shares on or after the Ex Date will not be entitled to receive the bonus shares.

You can view the Bonus Issue for any company on Radar in the Corporate Action section.

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