Today, I want to blog about something exciting that’s happening with one of India’s tech giants, Wipro. If you’ve ever been curious about how companies reward their shareholders, this blog post will give an idea. Even if you are some who is thinking about diving into the world of investing, this post will build some perspective about returns from stock. I’ll take example of the recent news event of Wipro to explain the point. I’ll talk about bonus shares.
1. Why Wipro?
You might wonder, “Why Wipro, and why now?”
Well, Wipro has just announced a bonus share issue. When bonus shares are issued by a blue chip company like Wirp is a significant event in the corporate world, especially for shareholders.
This not only reflects the company’s confidence in its future but also directly impacts the investors.
As someone keen on personal finance and investment strategies, I believe it’s crucial to understand these corporate actions. These events can affect your investment portfolio, in a long term, much more than we think.
2. How Much Bonus Shares Wipro is issuing?
Wipro has announced a 1:1 bonus share issue.
- This means that for every share an investor currently holds, they will receive an additional share at no extra cost.
- The record date for this bonus issue has been fixed for December 3, 2024. It means, shareholders who own Wipro stock on this date will be eligible to receive the bonus shares.
- This decision was made in conjunction with Wipro’s quarterly earnings report for Q2 FY2025. Bonus share issue can be an indication of a strong financial position. It is also a gesture of confidence in the company’s future performance.
The bonus shares will be issued from the company’s free reserves, securities premium account, or capital redemption reserve account.
This action effectively doubles the number of shares an investor holds. It will enhance the liquidity position of Wipro. It will also make the stock more accessible to new investors as it price per share will reduce post the bonus issue.
Wipro has a history of rewarding its shareholders through such mechanisms, with this being the 28th bonus issue since 1971. See the below data.
| SL | Announcement Date | Ex-Bonus Date | Bonus Ratio | Remarks |
| 1 | 17-Oct-24 | 03-Dec-24 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 2 | 18-Jan-19 | 06-Mar-19 | 1:3 | Held: 3 Share, Bonus: 1 Share |
| 3 | 25-Apr-17 | 13-Jun-17 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 4 | 23-Apr-10 | 15-Jun-10 | 2:3 | Held: 3 Share, Bonus: 2 Share |
| 5 | 22-Apr-05 | 22-Aug-05 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 6 | 16-Apr-04 | 25-Jun-04 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 7 | 13-Sep-97 | 20-Oct-97 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 8 | 01-Feb-95 | 24-Feb-95 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 9 | 30-Jul-92 | 12-Aug-92 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 10 | 22-Oct-89 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 11 | 15-Nov-87 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 12 | 22-Oct-85 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 13 | 22-Oct-81 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 14 | 31-Oct-71 | – | 1:3 | Held: 3 Share, Bonus: 1 Share |
| 15 | 16-Apr-04 | 25-Jun-04 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 16 | 13-Sep-97 | 20-Oct-97 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 17 | 01-Feb-95 | 24-Feb-95 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 18 | 30-Jul-92 | 12-Aug-92 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 19 | 22-Oct-89 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 20 | 16-Apr-04 | 25-Jun-04 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 21 | 13-Sep-97 | 20-Oct-97 | 2:1 | Held: 1 Share, Bonus: 2 Share |
| 22 | 01-Feb-95 | 24-Feb-95 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 23 | 30-Jul-92 | 12-Aug-92 | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 24 | 22-Oct-89 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 25 | 15-Nov-87 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 26 | 22-Oct-85 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 27 | 22-Oct-81 | – | 1:1 | Held: 1 Share, Bonus: 1 Share |
| 28 | 31-Oct-71 | – | 1:3 | Held: 3 Share, Bonus: 1 Share |
Let’s learn more about some basic aspects of bonus shares.
3. What Are Bonus Shares?
Imagine you own shares in a company like Wipro.
Now, the company decides to give you more shares without you having to pay anything extra. That’s right, they just hand them over to you! These are called bonus shares.
3.1 Here’s how it works
- Ratio: Wipro’s recent announcement is for a 1:1 bonus issue. This means for every share you own, you get one additional share.
- Purpose: Companies issue bonus shares to make their stock more attractive and liquid in the market. It doesn’t increase the total value of your investment immediately, but it increases the number of shares you own, which can be beneficial in various ways.
3.2 The Impact on Shareholders
- Increased Share Count: If you owned 100 shares before the bonus issue, after Wipro’s bonus declaration, you’d now have 200 shares.
- Liquidity: More shares mean more liquidity. This makes it easier to buy or sell the shares without significantly affecting the price.
- Potential for Dividend: If Wipro decides to pay dividends, you’ll now receive dividends on more shares than before. However, remember, the dividend per share might decrease, but your total dividend income could stay the same or increase if the company’s earnings grow.
- Psychological Effect: A bonus issue often signals that the company is doing well financially. Hence it is sharing its growth with shareholders. Bonus shares issue can boost investor confidence.
3.3 What Does This Mean for Potential (forthcoming) Investors?
- Trading Volume: There will be more shares in circulation, so liquidity positing of shares avaialable for trading will go up. The shares are likely to trade more. It is a good thing for potential investors. It is easier to buy and sell such shares.
- Affordability: The price per share typically drops after bonus shares are issued. Why? Since the company’s total value remains the same but the value is now spread over more shares. To get more clarity about bonus shares, read here. Hence, bonus issues make a share more affordable for new investors to buy in.
- Investment Considerations: While the immediate value doesn’t increase, the long-term growth potential does if the company (say Wipro) continues to perform well.
4. What I feel About Bonus Shares Issued By Companies?
From an investment perspective, bonus issues (like Wipro is doing now) is a strategic move.
It’s like getting giving a free gift to the shareholders for holding onto the shares of a company. The act of bonus shares issuance does make shareholders more valued (by the company’s management). It is certainly a good way to enhance the shareholder’s value.
I think, it is always a nice perk.
However, it’s essential to look beyond the immediate bonus:
- Fundamentals: In the current case, the investors must check Wipro’s fundamentals. Are they growing? Is their business model sustainable? Is these fundamentals are doing well and the company is also issuing bonus shares, it is a good situation.
- Market Sentiment: Bonus issues can create a positive buzz. After the announcement, till the record date, the stock price will surge. It is a good entry point for short term traders.
- Long-term View: If you’re considering investing, think long-term. Bonus shares are just one part of the equation.
Wipro’s bonus share issue is not just a corporate maneuver, but it also gives us an understanding about how the company’s top management is valuing their shareholders.
Events like these are pivotal and worth watching.
If you found this article useful, please share it with fellow investors or leave your thoughts in the comments below!
Have a happy investing.
