What Is a Bonus Share?

Bonus shares are a useful aspect in the way companies administer shareholder rewards and internal capital. A company does not need to pay dividends in cash, but as an alternative, it could decide to issue some of its accumulated reserves in the form of new equity and allocate the shares to its existing investors. This does not change the overall value of an investor's investment; it only increases the number of shares that one has and the market price is adjusted accordingly.  

To businesses, a bonus issue is a positive indicator of future profits and improves their capital base. It also enhances the liquidity of a stock to the investors and increases the accessibility of the stock to a greater number of participants, particularly in markets where the sensitivity of prices changes the trading behaviour. 

Key Takeaways

List Of Upcoming Bonus Shares In 2025

Here are the companies that have recently announced their bonus share list 2025: 

What Are Bonus Shares? 

Bonus shares are extra equity units a company allots to its existing shareholders without asking for any payment. These shares simply expand an investor’s holding while keeping their overall investment value unchanged. Companies typically turn to bonus issues when they want to reward shareholders but prefer not to release cash, either due to liquidity constraints or a preference to conserve capital. 

Some companies also use bonus shares to optimise tax efficiency, as issuing stock avoids the burden associated with dividend distribution. When a bonus issue is announced, the business is as though converting a certain part of its accumulated profits or reserves into share capital. 

What is a Bonus Issue? 

A bonus issue refers to a company issuing additional shares to existing shareholders at no cost in proportion to their current holdings. Since no cash is involved, the company’s liquidity remains unaffected. What changes is the number of outstanding shares, not the overall investment value.  

Although the dividend per share decreases because the share count rises, the shareholder’s proportional ownership stays the same, unlike in a rights issue. A bonus issue simply converts the company’s reserves into share capital and often reflects management’s confidence in future earnings.  

For example, holding 200 shares in a 4:1 bonus issue increases your total holdings to 1,000 shares, while the market adjusts the price so your total investment value remains unchanged. 

Who Is Eligible for Bonus Shares? 

Shareholders who own shares of the company before the Record Date are eligible. To ensure your name appears on the company's record by that date, you must purchase the shares before the Ex-Date. 

India currently follows the T+1 rolling settlement system. This means the Ex-Date is typically one business day before the Record Date. 

Once allotted, the new shares receive a new ISIN (International Securities Identification Number) and are credited to shareholders’ accounts, typically within 15 days of allotment. 

Types Of Bonus Shares 

There are two main types of bonus shares: Fully Paid Bonus Shares and Partly-Paid Up Bonus Shares 

Fully paid bonus shares 

Fully paid bonus shares are given to shareholders at no extra cost based on their existing holdings in the company. These shares are issued from sources such as: 

To understand partly-paid-up bonus shares, we first need to know what a partly-paid share is. A partly-paid share is a share where the investor has only paid part of the full issue price, with the remaining amount to be paid later in instalments when the company calls for it. 

When a company issues bonus shares on partly paid shares, these shares are converted into fully paid shares without asking for the unpaid amount. This process is done by capitalising profits. However, unlike fully paid bonus shares, partly paid bonus shares cannot be issued from the capital redemption reserve account or the security premium account. 

How To Calculate Bonus Share Percentage? 

To calculate bonus share percentage, you have to first know the bonus ratio, which is going to give you the number of free shares you are going to have for every share you already own.  

A 1:1 ratio implies one new share plus one share, and 2: 1 ratio indicates two new shares plus one share. After the identification of the ratio, compute the new number of shares by multiplying your existing shares by the bonus ratio and then including your original number of shares to get the new number. 

To take an example, a 1:1 bonus gives you an extra 100 shares when you hold 100 of them, giving you a total of 200 of your post-issue.  

Features Of Bonus Shares 

Bonus shares are employed as an instrument by which an organisation converts internal reserves to become new equity instead of cash. It is a way of maintaining liquidity and expanding the share base, as well as providing value to the current shareholders. Here are some of the detailed features of bonus shares 

What is the 'Record Date'? 

A cut-off date set by a company is known as the record date. Investors must be owners of shares in the company by this date for them to be eligible to receive a distribution. The record date is established so that a company can identify the eligible shareholders and send them their due distributions. 

What Is the Ex-Date?  

The Ex-Date (Ex-Bonus Date) is the cut-off date when a stock starts trading without the value of the upcoming bonus issue. To qualify for the bonus shares, investors must hold the stock before this date. Purchases made on or after the Ex-Date do not include bonus entitlements. 

Guidelines To Be Followed By a Company Before Issuing Bonus Shares  

1. The Articles of Association must sanction a bonus issue before bonus shares can be issued. If the Articles of Association are unable to do so, the company must pass a special resolution act at their general meeting 

2. In case of a general meeting, the bonus issue has to be sanctioned by the shareholders as well 

3. SEBI-issued guidelines must be followed 

4. The company must ensure the total share capital does not exceed the authorised share capital as a result of a bonus issue. In case of such a situation, the capital clause in the Memorandum of Association must be amended by increasing the authorised capital 

5. If the company has taken loans, the financial institution(s) involved must be previously informed 

7. Bonus shares that are to be issued must be fully paid. If shares are partially paid, it will make the shareholders liable to pay the uncalled amount 

Advantages And Disadvantages Of Bonus Shares 

Advantages for Companies:

For Shareholders

On the con side, neither the investors nor the corporations receive any income from the release of bonus shares. Additional shares reduce income per share, which might disappoint investors, making the stocks less attractive.  

Reasons for issuing bonus shares 

There are various operational and market-oriented reasons behind companies doing issuance of bonus share. The following are the fundamental reasons for incentive issuance of bonuses: 

When firms build up large amounts of free reserves, issuing a small amount of this as share capital enables them to restructure their capital without any effect on cash flow. 

An increase in the outstanding shares increases trading, which boosts market depth and reduces bid-ask spread. 

Issuance of bonus share is normally an indication of the management's confidence in the future ability of the company to generate earnings, a pointer of stability and expected performance consistency. 

The stock price falls proportionately after a bonus issue, so that the shares become accessible to retail investors without affecting market capitalisation. 

As additional shares are outstanding, the Earnings Per Share measure re-sets, providing a better picture of performance in terms of the enlarged stock capital. 

The price after the bonuses is low enough to attract small investors who would otherwise not have been able to afford it. 

Bonus allotments generate goodwill, which strengthens the loyalty of shareholders as more ownership is acquired without charge.  

How Bonus Share Is Different from Stock Split? 

A stock split and a bonus issue both increase the number of shares and reduce the price per share, but they differ fundamentally in accounting and intent. 

Conclusion

Bonus shares involve allotting additional free shares to existing shareholders to meet their liquidity requirements. Unlike issuing fresh shares, bonus shares don’t add to the company’s earnings.