Bonus shares represent a significant corporate action in the Indian stock market, offering a unique way for companies to reward their existing shareholders without distributing cash. This article delves into the intricate history, evolving regulatory framework, and tangible impact of bonus issues, with a particular focus on the Bombay Stock Exchange (BSE) and its listed entities.
Table of Contents
- Understanding Bonus Shares: Fundamentals and Investor Benefits
- SEBI's Regulatory Framework for Bonus Issues: Evolution and Recent Changes
- BSE Limited's Bonus Share History: A Corporate Perspective
- Historical Trends of Bonus Issues Across the Indian Stock Market
- Impact of Bonus Issues on Investors and Market Dynamics
- Conclusion
Bonus shares are free additional shares issued to existing shareholders, typically from a company's reserves. They signal financial strength and aim to reward investors while boosting share liquidity by increasing the number of outstanding shares.
For shareholders, this means a larger stake without extra cost and easier trading. Importantly, bonus issues differ from stock splits as they don't alter the shares' face value but instead capitalise reserves, offering a tax-efficient way to distribute value.
Wrap Up: Bonus shares are free shares from company reserves, showing financial health and increasing shareholder stake and liquidity. Unlike stock splits, they don't change face value but capitalise reserves.
SEBI, India's primary capital market regulator, continuously updates its guidelines to ensure fairness and protect investors, particularly concerning corporate actions like bonus share issues. These regulations aim for transparency and market integrity.
Historical Framework:
- Bonus issues had to be implemented within 15 days of board approval (or 2 months with shareholder approval).
- No specific timeline for crediting bonus shares or making them tradable, causing delays (2-7 working days).
New T+2 Rule (Effective October 1, 2024):
- Bonus shares will be available for trading within two trading sessions (T+2) after the record date.
- The deemed allotment date for bonus shares will be the next working day (T+1) after the record date.
- Bonus shares will be credited directly to the existing permanent International Securities Identification Number (ISIN), eliminating the previous need for a temporary ISIN.
- SEBI has introduced penalties for non-compliance with these stipulated timelines to ensure prompt adherence by companies.
Wrap Up: SEBI's new T+2 rule marks a significant stride towards modernising the bonus issue process, ensuring quicker access to shares for investors. This regulatory evolution enhances market efficiency and fosters a more transparent and predictable environment for all market participants.
As a leading stock exchange in India, BSE Ltd. is not just a platform for trading but also a listed entity that undertakes corporate actions, including bonus issues. BSE Ltd. has a recent history of issuing bonus shares, having announced two such events since its listing in 2017.
Consistent Bonus Policy: BSE Ltd. has announced two bonus issues, both at a 2:1 ratio, meaning shareholders receive two new shares for every one held.
Ex-Date
|
Bonus Ratio
|
Record Date
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23 May 2025
|
2:1
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23 May 2025
|
21 Mar 2022
|
2:1
|
22 Mar 2022
|
Wrap Up: BSE Ltd.'s consistent use of bonus issues, combined with its dividend and buyback policies, highlights a strong shareholder reward strategy. This practice reflects the company's robust financial health and its dedication to enhancing shareholder value.
Beyond the specific case of BSE Ltd., bonus issues have been a recurring feature across the broader Indian stock market. The period between 1991 and 2010, marked by India's economic liberalisation, saw a high volume of bonus issues. Many prominent Indian companies consistently issue bonus shares. The frequent 1:1 bonus ratio among blue-chip companies highlights their strategy to manage capital and reward shareholders.
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Wrap Up: The recurring bonus issues by leading Indian companies since 1991 highlight a mature market strategy to reward shareholders and manage capital effectively. This consistent practice, often at a 1:1 ratio, demonstrates robust financial health, boosts stock liquidity, and positively impacts investor confidence.
While seemingly a simple distribution of additional shares, a bonus issue sets off a chain of adjustments and influences that reshape the way derivative instruments are valued. Understanding these impacts is key to navigating the post-bonus landscape.
- Share Price & Investment Value: While the per-share price drops proportionally, your total investment value remains unchanged. This is a technical adjustment, not a loss.
- Liquidity & Affordability: More shares in circulation boost liquidity, making the stock easier to trade. The lower per-share price also makes it more affordable, attracting more investors.
- F&O Adjustments: Exchanges automatically adjust Futures and Options (F&O) contracts (e.g., dividing price/premium and multiplying lot size by an adjustment factor) to maintain contract value and prevent losses for traders.
- Confidence & Perception: Bonus issues signal a company's strong financial health and management confidence, often leading to increased shareholder trust and positive market perception.
Wrap Up: Bonus issues are financially neutral yet profoundly impact market dynamics by enhancing liquidity, improving affordability, and boosting investor confidence, all while requiring precise adjustments in derivative markets.
Full-Year FY25 Performance: Scaling New Heights

Insight: The revenue more than doubled, supported by growing adoption of BSE’s mutual fund platform (StAR MF), steady listing income, and international exchange gains (India INX).
Wrap-Up: FY25 was a transformative year, marking hyper-growth across business lines, a rare feat for a 149-year-old institution.
Bonus issues are a strategic tool for Indian companies, signaling financial strength, enhancing liquidity, and rewarding shareholders. SEBI's new T+2 rule, effective October 2024, significantly streamlines this process, improving market efficiency and investor access. This practice, exemplified by BSE Ltd.'s own history and widespread across the market, highlights evolving corporate governance and fosters greater investor confidence in the dynamic Indian equity landscape.
Bonus issues are a strategic tool for Indian companies, signaling financial strength, enhancing liquidity, and rewarding shareholders. SEBI's updated regulations, including the new T+2 rule, streamline this process, boosting market efficiency. This consistent practice across the market, exemplified by companies like BSE Ltd., underscores evolving corporate governance and fosters greater investor confidence in India's dynamic equity landscape.
FAQs:
Q1: What are bonus shares and how do they benefit investors in the Indian stock market?
Bonus shares are additional shares issued by companies to existing shareholders from their reserves, without any extra cost. They signal financial strength, increase share liquidity, and offer investors a larger stake and easier trading. Unlike stock splits, bonus issues don't alter face value but capitalize reserves, providing a tax-efficient way to distribute value.
Q2: How has SEBI's regulatory framework for bonus issues evolved, particularly with the new T+2 rule?
SEBI, India's capital market regulator, has continuously updated its guidelines for bonus issues to enhance transparency and investor protection. Historically, there were delays in crediting bonus shares. However, effective October 1, 2024, the new T+2 rule ensures bonus shares are available for trading within two trading sessions after the record date, credited directly to the permanent ISIN. This significantly streamlines the process and improves market efficiency.
Q3: Can you provide examples of BSE Limited's bonus share history and its shareholder reward strategy?
BSE Limited, a listed entity on the Indian stock exchange, has a consistent history of issuing bonus shares since its listing in 2017. Both of its announced bonus issues have been at a 2:1 ratio (two new shares for every one held). This consistent practice, combined with its dividend and buyback policies, demonstrates BSE Ltd.'s robust financial health and commitment to enhancing shareholder value.
Q4: What are the historical trends of bonus issues across the broader Indian stock market?
Bonus issues have been a prominent feature in the Indian stock market, particularly between 1991 and 2010, coinciding with India's economic liberalization. Many prominent Indian companies consistently issue bonus shares, often at a 1:1 ratio, reflecting a mature market strategy to manage capital, reward shareholders, boost stock liquidity, and positively impact investor confidence.
Q5: How do bonus issues impact investors and derivative market dynamics, including F&O adjustments?
While bonus issues are financially neutral for investors (total investment value remains unchanged as per-share price drops proportionally), they significantly impact market dynamics. They enhance liquidity, improve affordability by lowering the per-share price, and boost investor confidence. For Futures and Options (F&O) contracts, exchanges automatically adjust strike prices, lot sizes, and premiums using an adjustment factor to maintain contract value and ensure fairness for traders, preventing losses.