Bonus Shares
Bonus shares are extra shares a company may issue to existing shareholders, based on a stated ratio. They are a way to reward investors without asking them to pay for the new shares.
Start the lessonIntroduction
Additional shares for eligible holders
Bonus shares are additional shares that a company may issue to its existing shareholders in a specified proportion. They are generally issued by converting eligible reserves into share capital, subject to applicable laws, approvals, and the company's announcement.
The short answer
In a 1-for-2 bonus issue, an eligible shareholder receives 1 additional share for every 2 shares held on the relevant date.
Bonus ratio example
See how the share count changes
A 1-for-2 bonus ratio means one bonus share for every two eligible shares held.
Illustrative share count
5 bonus shares
10 original shares + 5 bonus shares = 15 shares in total.
This calculator illustrates the ratio only. Actual entitlement depends on the company's terms, eligibility date, and applicable rules.
What happens to value?
More shares do not automatically mean more value
A bonus issue increases the number of shares an eligible holder owns. It does not, by itself, add new business value to the company. In theory, if nothing else changed, the market price per share would adjust in proportion to the larger share count. Actual market prices can move differently as buyers and sellers respond to many factors.
Simple illustration
If 10 shares were each worth ₹100, the holding would be worth ₹1,000. After a 1-for-2 bonus, the holder would have 15 shares. A purely illustrative proportional price adjustment would be about ₹66.67 per share, still around ₹1,000 in total before market movements and other factors.
What to keep in mind
Check the official terms
- A bonus issue is not a cash payment. The shares are credited according to the company's announced terms and process.
- The company announces a ratio, such as 1-for-2, and relevant dates. Check official company and exchange disclosures.
- You must meet the eligibility requirements that apply on the relevant date; merely buying later may not qualify.
- More shares do not guarantee higher investment value, a higher share price, or future returns.
- A bonus issue is different from a stock split, which changes the face value and number of shares according to its terms.
Key points
What to remember
- Bonus shares are additional shares issued to eligible existing holders.
- A ratio states how many bonus shares may be issued for existing shares held.
- The bonus issue is not a cash dividend.
- The share count increases, but total investment value is not guaranteed to increase.
- Eligibility and fractional entitlements follow the official terms and applicable rules.
- Check company and exchange announcements for the details.
This lesson is for education only, not personalized financial, tax, or investment advice. Investments in securities are subject to market risks.
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