Domestic Economy Rolls as Corporate India Offers 40% More Bonus Shares

Domestic Economy Rolls as Corporate India Offers 40% More Bonus Shares


Issue of bonus shares by Corporate India to its shareholders in the first 10 months of the fiscal has shot up 40% over the total during the fiscal ended March ‘09, after declining for two straight years.


This interesting jump in bonus issues indicates positive sentiment of the corporate sector to serve a larger equity base.


Companies like Britannia, TCS, Reliance Industries, Adani Enterprises, Jindal Steel, Divi’s Lab, JP Associates etc  have  issued bonus shares in the April ‘09-January ‘10 period.

There are as many as 61 companies which have done so.


Jagannadham Thunuguntla, equity head with Delhi-based merchant bank SMC Capitals, said:  “The increase in companies doling out bonus equity to its shareholders reflects that the domestic economy is on the path of recovery.”


Corporate India has got the confidence to expand equity capital base and issue bonus shares owing to the fact that they have performed very well this fiscal.


Bonus issue is an offer of free additional shares to existing shareholders.

This is one of the ways of rewarding shareholders, who largely benefit from capital gains.


A company may decide to distribute further shares as an alternative to increasing the dividend payout.

It is also known as a “scrip issue” or “capitalization issue”.


The number of companies issuing bonus shares declined more than a quarter after hitting a peak in 2006-07 to 72 firms in 2007-08 and shrunk further to just 44 companies for the year ended March ‘09.


This came after three consecutive years of rise in number of bonus issues, when more listed firms announced a bonus bonanza in line with the bull run of the stock market.


Bonus shares are issued by companies through capitalization of their free reserves.

When a company announces bonus issue, it is an indication of its management’s confidence to serve a larger equity base.



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