When Bonus Shares Are Credited In Demat Account

Bonus shares are additional shares issued by a company to its existing shareholders without requiring them to make a separate payment. Some companies declare dividends to reward equity shareholders, with the dividends being credited directly to investors' bank accounts.

A bonus issue is another form of shareholder reward, in which additional shares are given to existing shareholders. Companies issue bonus shares by capitalising reserves, allowing eligible investors to increase their shareholding.

For investors, knowing when bonus shares are credited to a demat account matters because the additional shares may not appear immediately after the company announces the bonus issue.

The credit usually happens after the record date, once the necessary corporate action process is complete.

What are Bonus Shares and How Do They Work?

Bonus shares are additional equity shares that a company distributes to existing shareholders in a predetermined ratio. For instance, in a 1:1 bonus issue, an investor holding 100 shares may receive another 100 shares.

Companies issue bonus shares from eligible reserves or accumulated profits. The process increases the number of shares investors hold without requiring any additional investment.

However, a e bonus issue does not automatically increase the overall value of an investor’s holding because the share price generally adjusts after the issue.

Bonus shares can also increase the company’s paid-up share capital and give investors additional shares to sell or retain, depending on their investment strategy.

What are the Record Date and Ex-Record Date?

The record date is the date the company uses to determine which shareholders are eligible to receive bonus shares based on their holdings.

The ex-record date is one day before the record date, when shares trade without the entitlement associated with the upcoming corporate action.

To receive bonus shares, investors must generally purchase and hold the company’s shares within the applicable settlement timeline so that their names or beneficial ownerships qualify on the record date.

Eligibility Criteria for Receiving Bonus Shares

Bonus shares are issued only to existing eligible equity shareholders. The common eligibility requirements include:

• Record date eligibility:

Investors must qualify as shareholders based on their holdings on the relevant record date.

• Demat account:

The investor should have an active demat account capable of receiving the additional securities.

• Settlement completion:

Shares purchased before the applicable deadline must settle within the required timeframe for the investor to become eligible.

• Corporate action terms:

Investors must satisfy the specific conditions mentioned in the company’s bonus issue announcement.

When are the shares credited to a demat account?

Bonus shares are generally credited to an eligible investor’s demat account within 15 to 20 business days starting after the record date. This includes the time s it takes for the company to complete the required corporate action formalities.

The exact timing can vary depending on the company, registrar, depository, and applicable market processes.

Bonus shares may not appear in the demat account immediately on the record date. First, the company and its registrar process the eligible shareholder data and complete the allotment and corporate action procedures. The securities are then credited electronically to the investor’s demat account.

Investors should therefore avoid assuming that a delay immediately means they are not eligible. If the shares are not credited within the timeline communicated by the company or registrar, investors can check the corporate action status and contact their broker or registrar.

The credited bonus shares are normally reflected in the investor’s holdings once the depository completes the credit. Until then, the existing shareholding may continue to appear unchanged in the demat account.

How to check bonus shares in a demat account?

Investors can use their broker’s platform or depository statement to verify whether bonus shares have been credited.

Here are the following steps:

• Open your demat account:

Log in to your broker’s website or mobile app linked to your demat account.

• Check holdings:

Open the portfolio or holdings section and search for the company that announced the bonus issue.

• Compare quantity:

Compare the current share quantity with the number of shares held before the bonus issue.

• Review transaction statement:

Check the transaction or holding statement for an entry showing the bonus share credit.

• Check corporate action:

Review the broker, registrar, or company announcement for the latest credit status and relevant dates.

Note: If the expected shares are missing after the stated processing period, investors can contact the broker or registrar with their demat account details and details of the corporate action.

FAQs

Are bonus shares automatically credited?

Yes, bonus shares are automatically credited to eligible shareholders' demat accounts. The process is completely online and automated. Investors do not have to fill out a form or apply separately.

Why are my bonus shares not credited?

It may take about 15 to 20 days from the record date for bonus shares to be credited. Before that, check whether you are eligible.

Will buying shares on the record date get you bonus shares?

No. To be eligible for bonus shares, you must buy the shares at least one day before the ex-date, because share delivery in India takes T+1 day.

Can I sell shares after the record date and still get bonus shares?

Yes, if you held shares on the record date, you will get bonus shares.

Do I need to fill out any form to get bonus shares?

No. Bonus shares are automatically credited to your Demat account if you are eligible. There's no need to apply, submit a request, or pay any fees.

Are bonus shares beneficial?

Yes, they increase your share count and demonstrate the company's strong financial position.