What is the impact of a bonus issue on equity holdings and F&O positions?

Impact of Bonus Issue on Holdings:

Q: What is a bonus issue, and how does it affect my holdings?

A: A bonus issue is when a company distributes free shares to eligible shareholders. In the case of TradeJini, the share price falls in the ratio of the bonus allotment, but worry not – it doesn’t impact the overall value of your holdings. We display the bonus quantity only after they are credited.

Example Scenario:

Q: Can you give me an example of how a bonus issue works?

A: Certainly! Let’s say Mr. Manav holds 10 shares of Reliance at ₹100 each, and the company announces a 2:1 bonus issue. After the bonus issue, Mr. Manav will receive 2 bonus shares for every share held, resulting in a total of 30 shares (10 originally bought + 20 bonus shares). Although the share price drops to ₹33.33, the value of Mr. Manav’s holdings remains ₹1,000.

Partial Bonus Shares:

Q: What happens if a company announces a 1:2 bonus?

A: If an investor holds just 1 share, they’ll get 0.5 shares as a bonus. These partial bonus shares are settled in cash, and the funds will be credited to the investor’s primary bank account.

Impact on P&L:

Q: How does a bonus issue affect my Profit & Loss (P&L)?

A: Your P&L will show an artificial drop until the bonus shares are credited to your demat account. Once credited (which takes up to 15 days), your P&L will be updated. You’ll receive an SMS from CDSL when the shares are credited.