• Bonus shares are extra shares a company gives to its existing shareholders for free. You get them in a set ratio based on how many shares you already own.
• Companies issue bonus shares to reward shareholders without paying cash and to use their reserves more effectively.

Key points about bonus shares

• Free shares: You don’t pay anything to receive bonus shares
• Fixed ratio: The company announces a ratio like 1:2 or 2:1 to decide how many extra shares you’ll get
• Eligibility: Only shareholders who hold the stock on the record date qualify
• Value stays the same: Your total investment value doesn’t change. You get more shares, but the share price adjusts accordingly

Examples of bonus share ratios and value impact

Bonus Ratio	Shares held	Bonus shares received	Total shares after bonus	Price before bonus	Price after bonus	Total value	Average price after bonus
1:2	100	50	150	₹300	₹200	₹30,000	₹200
2:1	10	20	30	₹300	₹100	₹3,000	₹100

Explanation:(First Example Investment amount)

• Before bonus: 100 shares × ₹300 = ₹30,000
• After bonus: 150 shares × ₹200 = ₹30,000
• So, the total value remains the same, only the share price adjusts.

Note: When a company issues bonus shares, its overall market value doesn’t change. No new money comes in; the same value is just divided among a larger number of shares.

How is the average price calculated?

• Total Value = Shares Held × Price Before Bonus
• Average Price After Bonus = Total Value ÷ Total Shares After Bonus

Example 1:

• Total Value = 100 × ₹300 = ₹30,000
• Average Price = ₹30,000 ÷ 150 = ₹200

Example 2:

• Total Value = 10 × ₹300 = ₹3,000
• Average Price = ₹3,000 ÷ 30 = ₹100

Related Articles:

• Will I be eligible for a bonus share?
• When will the bonus Shares be credited to the account?