List of Bonus Shares (Upcoming Bonus Issue in 2025)

What are Bonus Issues?

Bonus issues, also known as "free share offers," occur when companies give existing shareholders additional shares at no cost. For example, if you own ten shares, the company might give you one extra share as a bonus.

How Bonus Issues Work?

Bonus issues increase the total number of shares available to shareholders without altering the company's overall value. Companies typically use their profits or saved-up shares for this purpose. Bonus shares are not subject to taxation when distributed, but any profits made from selling them later may be taxable.

Allocation of Bonus Shares

Every shareholder receives bonus shares based on their current shareholdings. This allocation does not affect their ownership percentage because everyone receives extra shares in the same proportion. For instance, in a two-for-one bonus issue, for every share you own, you'll receive two more. Thus, if you had 100 shares, you'd get an additional 200 (100 × 2 = 200) bonus shares.

Types of Bonus Shares

Companies have the choice to offer bonus shares or not. There are two main types:

Fully Paid Bonus Shares:

• These bonus shares come from different company reserves, like the capital reserve, redemption reserve, profit and loss account, or security premium account.

• Shareholders receive the same number of shares they held before the bonus issue. The total number of shares doesn't increase, so each shareholder's ownership stays the same.

Partially Paid Bonus Shares:

• Partially paid bonus shares are for shares that shareholders only paid part of the cost for when they first got them.

• The rest of the money owed for these shares is due when the company asks for it.

• Once shareholders pay the remaining amount, these partially paid shares become fully paid shares.

• Companies can only use certain reserves, like the capital reserve, to issue partially paid bonus shares. They can't use reserves like the capital redemption reserve or security premium account for this purpose.

Advantages of Issuing Bonus Shares

• Encouraging More Investors:When companies increase the number of shares available, it makes buying their stocks easier and more affordable for everyone. This can attract more everyday investors and make trading smoother.

• Choosing Share Rewards: Instead of giving out cash dividends, companies sometimes give bonus shares to show they're doing well. This can be especially useful for smaller companies that want to bring in more investors but don't always have steady profits to pay regular dividends.

• Showing Good Financial Health: When a company offers bonus shares, it's a sign that they have enough money saved up to reward investors. It also shows that the company is doing well financially and is set to keep growing.

• Tax Benefits:Bonus shares don't get taxed when they're given out, which makes them more appealing than cash dividends, which can be taxed at high rates. However, if you sell bonus shares later and make a profit, you might need to pay tax on that.

Disadvantages of Issuing Bonus Shares

• Missing Other Opportunities:Sometimes, the money used for bonus shares could have been used for other things that might benefit shareholders more. For example, it could have been used for buying new companies or improving equipment. Missing these chances could make investors less happy.

• Less Cash for Dividends: When companies give out bonus shares, it doesn't bring in any extra money for them. This might mean they have less to give out as cash dividends in the future, which could upset some shareholders. Also, some investors might worry that the company is more focused on giving out shares than paying cash dividends.

• No Immediate Money:Unlike cash dividends, bonus shares don't give shareholders instant money. After a bonus issue, the value of each share might drop because there are more shares available. So, even though you have more shares, each one might be worth less, and you don't gain financially right away.