What is a Bonus Issue/Bonus Share?

Bonus Issue is a corporate action wherein free additional shares are offered to existing shareholders, distributed in proportion to their holdings. Shares acquired through a bonus issue are called Bonus Shares. 
  • You will be eligible for bonus shares if you purchased the stocks before the ex-date (for it to be settled in your Demat account by the record date). 
  • If you purchase the shares on or after the ex-date, you will not be eligible for the issue since the shares will not be in your name as per company records on the record date. 
  • Like stock splits, bonus issues result in no changes to market capitalisation or investment value and the share price tends to fall to the extent of the issue. 
  • The face value of shares are unaffected by bonus issues (unlike stock splits, where the face value changes in proportion to the split)

 Important dates during a Bonus Issue: For example, Reddington India concludes its Annual General Meeting (AGM) on 10th November. A 3:1 bonus issue is approved by the Board of Directors and related dates are announced. That is, shareholders will receive 3 bonus shares for every share held.

Declaration Date: 10th Nov
The day the bonus issue is announced to the public.
Ex-date: 31st Dec
To be eligible to receive bonus shares, purchases must be made on or before 30th Dec.
Investors who purchase shares on or after the ex-date will not be eligible to receive bonus shares.
From the bonus issue declaration date to the ex-date, the shares are said to be trading cum bonus (with bonus).
Record Date: 31st Dec All shareholders of Reddington India as per company records on 31st Dec will receive bonus shares in the given ratio (3:1).
Credit DateThe day the bonus shares are credited to the demat accounts of investors. This process may take up to 15 days from the record date.

Since we have shifted to the T+1 settlement cycle, the ex-date and record date for corporate actions fall on the same day.

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