Impact of a Bonus Issue on Equity Holdings and F&O Positions

Post Date : March 3, 2025

Impact of a Bonus Issue on Equity Holdings and F&O Positions

A bonus issue is when a company distributes additional shares to existing shareholders at no extra cost. The number of new shares is issued in a specific ratio, such as 2:1, meaning shareholders receive two bonus shares for every one share they own.

Impact on Equity Holdings

• The share price adjusts downward based on the bonus ratio, but the overall value of holdings remains unchanged.
• RMoney displays the bonus shares only after they are credited to the Demat Account.

Example Scenario

Mr. A holds 10 shares of Reliance at ₹1000 each, and the company announces a 2:1 bonus issue. This means Mr. A will receive 2 bonus shares for every 1 share held.

Before Bonus Issue:

• Shares held: 10
• Share price: ₹1000
• Total value: 10 × 1000 = ₹10,000

After Bonus Issue:

• Shares held: 30 (10 original + 20 bonus shares)
• Adjusted share price: ₹333.33 [(1000 ÷ (2+1)]
• Total value: 30 × 333.33 = ₹10,000 (unchanged)

Partial Bonus Shares

If an investor holds 1 share and a company announces a 1:2 bonus, they would receive 0.5 bonus shares. Since fractional shares cannot be credited, the company settles them in cash, which is credited to the investor’s bank account.

Impact on P&L

• Until the bonus shares are credited (which may take up to 15 days), the P&L may show an artificial drop due to the adjusted stock price.
• Once credited, the P&L updates accordingly.
• Investors receive an SMS from CDSL when shares are credited.

Impact on F&O Positions

• The strike price of options and lot sizes are adjusted to reflect the bonus issue while maintaining the same contract value.
• The adjustment factor is calculated based on the bonus ratio.

Example Calculation (1:1 Bonus Issue)

• Bonus Ratio: 1:1

• Original Strike Price: ₹100

• Original Lot Size: 500

• Adjustment Factor: 2

• Revised Strike Price: ₹50 (100 ÷ 2)

• Revised Lot Size: 1000 (500 × 2)

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