Three 1:1 bonus shares: IT stock turns ₹1 lakh to ₹2.75 crore in 20 years (2024)

FAQs

How is a 1 1 bonus share calculated? ›

This means that if a company declares a bonus issue of 1:1 then the number of shares of the company effectively doubles. In this case, since the number of shares has doubled, the stock price of the company will become half of what it was before the issue.

Bonus shares calculation

For example, say a company issues bonus shares in a 3:1 ratio. This means you will receive 3 shares for every 1 share in your portfolio. So, if you hold 100 shares in the company, you will receive 300 bonus shares.

The company has already announced the issue of bonus shares in the proportion of 4:1. This means, that four new fully paid-up bonus equity shares of face value of Rs l each will be provided for one existing fully paid-up equity share of Rs 1 each held by the shareholder.

The company board approved bonus shares in 2:1 ratio, which means two bonus shares for every one share of the company held by eligible shareholders.

Hence, after a bonus issue, the total number of shares increases with a constant ratio of the number of shares held to the number of shares outstanding. For example, if a company announces a bonus issue in a ratio of 3:1, it means that shareholders will get three bonus or free shares for every single share they hold.

According to the filing, the board has approved the bonus issuance in the ratio of 1:1. This means, eligible shareholders will be awarded one bonus share for each share held by them.

A 3-for-1 stock split means that for every one share held by an investor, there will now be three. In other words, the number of outstanding shares in the market will triple. On the other hand, the price per share after the 3-for-1 stock split will be reduced by dividing the old share price by 3.

Advantages of Bonus Shares

1) Investors do not have to pay any tax while receiving bonus shares from the company. 2) Bonus shares are considered beneficial for long-term shareholders of the company looking to multiply their investment.

In a bonus issue, the stock price declines to the extent of the bonus ratio, but this decline should not be mistaken for a correction in stock price or a fall. If the ratio is 2:1, the existing shareholders get two additional shares for every share they hold at no additional cost.

Can I sell my bonus shares? ›

The investor can surely meet these liquidity objectives by selling the bonus shares in the open market, but this would reduce their stake in the company proportionately. Investors must be careful of tax implications in case of selling bonus shares.

Bonus Share Vs Stock Split

A bonus share is an extra share offered to the existing shareholders. On the other hand, a stock split involves dividing the existing share into multiple shares according to a split ratio. Bonus shares are beneficial for the existing shareholders.

Both bonus issues and stock splits are tools companies use to increase their share capital and make their stocks more affordable to investors. While bonus issues involve issuing free additional shares to existing shareholders, stock splits divide existing shares into smaller units.

Bonus issues are payments made to shareholders from a company's net reserves while dividends are paid out from net profits. Dividends are paid to shareholders in the form of cash which gets credited to your registered bank account (linked to Demat account), while bonus issues are paid in additional shares.

A bonus issue is represented as a ratio – (bonus shares : existing shares held). If the company declares 1:1 bonus shares, it means you will get the same number of extra shares to the ones you hold presently. In the case of 1:2 bonus shares, 50% additional shares will be awarded.

Calculation: Let's assume you own 100 shares of a company, and it announces a 1:1 bonus issue. In this case, for every one share you currently own, you will receive one bonus share. So, with your 100 shares, you will receive an additional 100 bonus shares.

To calculate a sales commission bonus, multiply the employee's total sales by the predetermined bonus percentage. For Example: If Alex generated $60,000 in client sales and the commission rate is 8%, his bonus would be $4,800. Congrats Alex!

3) Bonus shares are free of cost to shareholders as they are issued by the company, which increases the outstanding shares of an investor in the company and enhances the liquidity of the stock.

Calculation of the adjustment factor: Adjustment factor for Bonus issue of A:B is defined as (A+B)/B. In the case of BERGEPAINT, the adjustment factor is (1+5)/5 = 1.2, since the bonus issue ratio is 1:5.