What is Stock Split and Bonus Shares

In this article, you will know what is Stock Split and Bonus Shares.

What is Bonus issue

In the bonus issue, the existing shareholders of the company get free additional shares, these additional shares are allotted to you on the basis of the number of shares you have on the bonus record date. In the bonus issue, the company issues new shares in the market.

For example, in the 2:1 bonus issue, shareholders get two additional shares for each share they own. Suppose investor A has 100 shares of company ABC then after 2:1 bonus investor A will have 100 + 200 bonus i.e. total of 300 shares of company ABC.

Overall, if the company ABC had 1 crore shares in the market before then the total number of shares after the bonus will be 3 crores.

But it also has an impact on the share price, which means that if a company issues a 2:1 bonus, then its share price should also become one-third.

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But it is not exactly one-third because the share price depends on the demand and supply of the market.

Due to which the stock price can fluctuate and hence it is not necessary that the price should be exactly one-third after the bonus issue.

Bonuses are issued to reward shareholders and encourage retail participation.

What is Stock Split

In a stock split, the board of directors of the company increases the total number of shares by dividing the existing shares into multiple shares. A stock split does not make any difference to the total market cap of the company.

It is different from a bonus because the company does not issue new shares but divides its existing shares into multiple shares. For example, a 2:1 stock split doubles the number of shares of existing shareholders.

This means that if the company had 1 crore shares in the market before the stock split, then after the stock split, the company would have two crore shares in the market.

In this, the share price of the company should be reduced to half but as we told in the bonus issue that it is not exactly half, generally stock split is done to reduce the share price and make it more affordable.

So that more people can buy the shares of the company and there is no liquidity issue in the shares.

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We have considered only those companies whose market cap is more than 2000 crores, in this list we will cover in ascending order of market cap, that means we will tell you about the company which has the highest market cap at the end.

We often tell you about those companies which have split stock or announced bonuses in recent times. That’s why today we will tell you about two such companies whose bonus or stock split date is approaching.

Steel Strips Wheels Ltd.

Stock Split announce date	On 3 September
Stock Split Ratio	2:1
Record date	22 November
Ex-split/bonus date	18th November
P/E ratio	15.31
Debt to equity ratio	0.88
Return on equity	6.73%
Net profit margin	2.78%

Steel Strips Wheels Ltd. This company is involved in the business of design, manufacturing, and supply of steel wheel rim and alloy wheels.

On 3 September 2021, the company announced a 2:1 stock split, which means that every single share you buy will be converted into two shares.

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For example, if you have 100 shares of this company, then after the stock split you will have 200 shares of the company.

The record date of this split is 22 November 2021 and the ex-split/bonus date is 18th November 2021 i.e. if you buy the company’s shares on number 17 or before then you will be eligible for this split.

The company has a P/E ratio of 15.31 and a debt to equity ratio of 0.88. In terms of profitability, the company has a return on equity of 6.73% and a net profit margin of 2.78%.

In the last five years, the company’s sales have almost compounded at the rate of 8.26%.

The share price of this company has increased by 274.23% in the last year and the last five years, the company has given a compound annual return of 24.23%.

Man Infraconstruction Ltd

Stock Split announce date	October 4
Stock Split Ratio	1:2
Record date	19th November
Ex-split/bonus date	17th November
P/E ratio	20.47
Debt to equity ratio	0.6
Return on equity	4.48%
Net profit margin	7.49%

Man Infraconstruction Ltd This company is involved in the business of civil construction. On October 4, this company has announced a bonus issue of 1 for 2 i.e. you will get one free share for every 2 shares you buy.

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For example, if you have 100 shares of the company, then after the bonus you will get 50 shares free and you will have a total of 150 shares.

The record date of this bonus issue is 19th November 2021 and this ex-bonus date is 17th November 2021 i.e. if you buy the shares of the company on or before 16th November then you will be eligible for this bonus.

The company has a P/E ratio of 20.47 and a debt to equity of 0.6. In terms of profitability, the company has a return on equity of 4.48% and a net profit margin of 7.49%.

In the last five years, the company’s sales have almost compounded at the rate of 13.54%. The share price of this company has increased by 440.15% in the last year and has given a compound annual return of 27.6% in the last five years.

So these were the two stocks that recently did bonus issue or stock split declaration and whose record date is approaching.

Let us remind you that this article is only for educational purposes and there is no buy and sell recommendation of any kind.

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