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Bonus shares meaning in simple words: free shares, same value

The Plainomics desk2 sources

Bonus shares: extra shares a company gives its shareholders for free. You get more shares, but the company, and your slice of it, stays the same size.

Sameer watches a business show on the office TV while Riya explains, chai glasses lined up on the table.

The story

two people, one chai stall

A trader on TV says Sameer Chai should announce a bonus. Sameer turns to Riya.

Sameer

If we give everyone free shares, won't they love us?

Riya

For a day, maybe. Say we do one-for-one. Every shareholder gets one new share for each share they own. Our 5 crore shares become 10 crore.

Sameer

Where do the new shares come from?

Riya

From our reserves. We move ₹50 crore from reserves into share capital. It's money already inside the company changing columns.

Sameer

So your mum's 200 shares become 400.

Riya

And the price should roughly halve, from ₹54 to about ₹27. Her ₹10,800 stays about ₹10,800. Same kettle of chai, poured into more cups.

Sameer

Then why does anyone bother?

Riya

A ₹27 share feels easier to buy than a ₹54 one. And it tells people we're confident the reserves aren't going anywhere.

The grown-up version

same idea, exact words

A bonus issue gives existing shareholders additional fully paid shares in proportion to their holding, without payment. The company capitalises part of its free reserves, securities premium or capital redemption reserve into share capital. It cannot use revaluation reserves, and bonus shares cannot be issued in place of a dividend. Earnings per share for all periods shown are restated for the new share count. Since October 2024, bonus shares are credited the day after the record date and can be traded the day after that (T+2).

Formula

New shares = Shares held × bonus ratio. Adjusted price ≈ Old price × Old shares ÷ New shares.

Which rule asks for itSection 63, Companies Act, 2013; Chapter XI, SEBI (ICDR) Regulations, 2018; Ind AS 33.

Spot it in the wild

a real annual report, a real page

Bajaj Finance secretarial audit report listing a 4:1 bonus issue and a share split
Found it: p.106Bajaj Finance Ltd · Annual Report 2025-26 (secretarial audit report)
  1. A 4:1 bonus: four free shares for every share held.
  2. In the same year it also split each ₹2 share into two ₹1 shares. A split is a different event.

Don't mix it up

the usual confusions

  • Bonus shares ≠ stock split

    A split cuts the face value (₹10 to ₹5) and doubles the shares. A bonus keeps the face value at ₹10 and moves money from reserves to capital. For you, the result looks almost the same.

  • Bonus shares ≠ dividend

    A dividend pays you cash, and the company has less money afterwards. A bonus pays no cash, and the company has exactly as much as before.

  • Bonus shares ≠ rights issue

    In a rights issue you pay for the new shares. Bonus shares are free.

Three quick sips

no sign-up, nothing saved

1/3 Riya's mum owns 200 Sameer Chai shares worth ₹54 each. After a 1:1 bonus, what does she hold?

Hindi mein

बोनस शेयर

बोनस शेयर वे मुफ़्त अतिरिक्त शेयर हैं जो कंपनी अपने शेयरधारकों को देती है; शेयर बढ़ते हैं, पर कंपनी में आपका हिस्सा उतना ही रहता है।

Sources

  1. Companies Act, 2013, India Code
  2. Circular on bonus issue timelines, 16 September 2024, SEBI (via NSE)