Bonus Issue
The issue of additional free shares to existing shareholders, funded by capitalising reserves.
Formula
New Share Count = Old Count x (1 + Bonus Ratio); Adjusted Price = Old Price / (1 + Bonus Ratio)
Unit
shares
In depth
A bonus issue creates no value: reserves move into share capital, the share count rises and the price falls proportionally, leaving every holder with the same total worth. It is often celebrated as a reward, which it is not — the shareholder receives more pieces of the same cake. Its genuine effects are improved liquidity from the lower price and a signal that the board expects earnings to support the larger share count. In India bonus shares carry the original acquisition date for holding period purposes but a zero cost of acquisition, which matters for capital gains computation.
Worked example
Holding 100 shares at ₹600 in a 1:1 bonus gives 200 shares at ₹300 — ₹60,000 before and after. Reserves fall and share capital rises by the face value of the new shares; nothing else changes.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Bonus Issue” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.