Bonus Shares Declared in the Stock Market

Bonus shares declared in the stock market can be a great way to increase your investment returns. In fact, some companies declare bonus shares as a way to reward their loyal shareholders.

Bonus shares are essentially free shares given to existing shareholders, and they're usually declared by companies that have performed well financially. This means that if a company has made a profit, it may decide to distribute some of those profits to its shareholders in the form of bonus shares.

For example, if a company declares a 1:1 bonus share ratio, it means that for every one share you own, you'll receive one additional share. This can significantly boost your investment portfolio, especially if the company's stock price is rising.

However, it's essential to note that bonus shares don't necessarily increase the value of your investment. Their value is usually tied to the company's overall performance and market conditions.

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Companies issue bonus shares for a variety of reasons. One of the primary reasons is to lower the current price per share, making it more attractive to investors.

Issuing bonus shares can also promote liquidity for its shares in the secondary market, allowing investors to easily buy and sell shares. This can help to increase trading activity and boost the company's reputation in the market.

To improve retail investor participation, companies may issue bonus shares, which can make the shares more accessible to individual investors. By doing so, companies can attract a wider range of investors and increase their shareholder base.

Issuing bonus shares can also serve as an alternative to dividend payments to shareholders. Instead of paying dividends, companies can issue bonus shares to reward their shareholders.

Here are some of the key reasons why companies issue bonus shares:

Bonus shares are allocated to existing shareholders based on their current holdings in the company. For instance, if a company announces a "one-for-two" bonus share issue, it implies that a shareholder will receive one additional share for every two shares they already own.

The bonus share allocation is calculated by multiplying the number of shares owned by the bonus share ratio. For example, if an investor possesses 1,000 shares, the bonus share allocation would be calculated as follows: 1,000 * ½ = 500 bonus shares.

Shareholders who own company shares on the record date are eligible to receive the bonus shares. This date is crucial for bonus share eligibility.

The record date is when the company checks its records to identify eligible shareholders for its bonus issue. The ex-date is the date by which you should purchase the company’s shares if you want to be a registered shareholder by the record date.

To be eligible for a bonus issue of shares, you must purchase the company’s shares by the ex-date. This example illustrates how eligibility for a bonus issue of shares works: a company announces a bonus issue on April 5th and sets the record date as April 26th, meaning the ex-date is April 25th.

Fully paid bonus shares are those shares for which the shareholder has already paid the entire amount due at the time of issuance.

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The record date for bonus share issuance is a crucial date that shareholders need to be aware of. It's usually set by the company and can be found in regulatory filings or press releases. For example, Transformers and Rectifiers (India) has set February 14, 2025, as the record date for its 1:1 bonus share issuance.

The record date typically determines the eligibility of shareholders to receive bonus shares. In some cases, the company may also specify the date for allotment and listing of the bonus shares. For instance, the allotment for Transformers and Rectifiers (India) is on February 17, with shares set to list on February 18.

Bonus share issuance can be a great way for companies to reward their shareholders and increase the liquidity of their shares. However, it's essential for investors to understand the ratio and other details of the bonus share issuance. For example, Starlineps Enterprises has announced a 1:5 bonus share issuance.

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The record date for bonus share issuance can also be used to determine the ex-date, which is the date when the bonus shares are traded without the rights to the bonus shares. For instance, Easy Trip Planners has given a positive yield of 45 per cent so far this year and has a 52-week range of Rs 476.50 to Rs 239.00.

Companies may also specify the proportion of bonus shares to be issued. For example, Salasar Techno Engineering Ltd has announced the issue of bonus shares in the proportion of 4:1. The company has already announced the record date for the bonus shares.

In some cases, the company may also specify the date for fixing the record date. For instance, the company has informed the exchange that it will fix and inform the record date in the coming days.