When are Bonus Shares credited in Demat Account?

Bonus shares are an excellent way for companies to reward their shareholders by offering additional shares free of charge, based on their existing holdings. Understanding when bonus shares are credited in Demat Account and its process is essential for all investors who wish to benefit from these opportunities.
Read this blog to understand the entire bonus share credit in Demat Account process, from the announcement to the crediting of bonus shares, along with eligibility criteria, etc. This will give you an idea when will bonus shares be credited to Demat Account.

Decoding bonus shares: A comprehensive overview

Bonus shares are issued by a company to its existing shareholders, without any additional cost, usually in proportion to the shares they already hold. Companies generally issue bonus shares as a way to distribute retained earnings to shareholders in the form of additional equity. Instead of paying dividends, the company capitalises on its profits and reserves, issuing extra shares. It allows shareholders to increase their holdings without needing to invest further capital.

Concept and nature of bonus shares

Bonus shares are additional shares offered to shareholders in proportion to the shares they already own. Generally, a company may issue bonus shares in a ratio such as 1:2, meaning for every two shares held, one additional share is provided. This is a way for companies to reward shareholders without depleting their cash reserves.
These are also known as scrip dividends and don’t require any fresh capital outlay from the shareholder. When bonus shares are issued, they do not impact the value of the shareholder’s investment immediately, though they may have long-term effects on share liquidity and price.

How bonus shares impact shareholder value?

The issuance of bonus shares does not change the overall value of an investor’s holdings. Although the total number of shares increases, the market value per share usually decreases proportionately, keeping the overall value of the investment intact.
However, bonus shares can still lead to potential long-term gains if the company continues to perform well. They may also improve liquidity by increasing the number of shares available for trading in the market, making the stock more accessible to investors.

Journey of bonus shares to your Demat Account

The journey of bonus shares from announcement to crediting in your Demat Account involves several steps. After the company makes the announcement, a record date is set, which determines the shareholders eligible for receiving bonus shares. Once this date is passed, the process for the credit of bonus shares begins. This entire process of bonus share credit in Demat Account may take a few weeks to complete. You can check the timing of bonus shares credit with your DP.
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Understanding the record date and its significance

The record date is an important process in issuing bonus shares. It determines which shareholders are eligible to receive bonus shares. Only those who hold the company’s shares on the record date are eligible for the bonus issue.
If you are a shareholder on this date, your Demat Account will receive the bonus shares. It's important to note that the ex-date, which is a few days before the record date, is the date from which new buyers of the stock will not be eligible for bonus shares.

Process from announcement to credit in Demat Account

The Demat Account bonus shares process is as follows:

1. Announcement: The company announces the bonus issue, including the ratio (e.g., 1:1 or 2:1) and the record date.

2. Ex-date and record date: The ex-date is typically a few days before the record date. Only shareholders who own the stock as of the record date are eligible for bonus shares.

3. Book closure: The company closes its share register for a specific period to verify the eligible shareholders.

4. Issuance of bonus shares: After verification, bonus shares are issued based on the announced ratio.

5. Credit to Demat Account: Finally, the process of bonus share credit in Demat Account happens for eligible shareholders. It typically takes 2-3 weeks from the record date for bonus shares to appear in Demat, depending on the company’s processing timeline.

Eligibility criteria for receiving bonus shares

To receive bonus share credit in Demat Account, investors must meet specific eligibility criteria, as set by the company issuing them. These criteria are often linked to the ownership of shares on the record date.

Who qualifies for bonus shares?

• To qualify for bonus shares, investors must hold shares of the issuing company on the record date.
• The investor must have a valid Demat Account to receive the bonus shares electronically.
• Bonus shares are given to both retail and institutional investors, provided they are shareholders of the company as of the record date.
• It’s important to be aware that the shares must be in your Demat Account before the record date; if they are in physical form, they need to be dematerialised to receive the bonus shares.

Key considerations for investors

Eligibility on the record date: Only those who own shares as of the record date are eligible for the bonus issue.

Demat Account: Ensure your shares are in a valid Demat Account as bonus shares are credited electronically.

Ex-date: Remember that you need to purchase shares before the ex-date to be eligible for bonus shares.

Stock split: In some cases, companies may issue bonus shares alongside stock splits, so be sure to track both events if applicable.

Tax implications: Bonus shares are generally not taxed at the time of issuance. However, tax may be applicable when you sell them.

Conclusion

Bonus shares are a valuable way for companies to reward their shareholders, and understanding the entire process of how they are credited to your Demat Account is important for investors. If you are wondering how long for bonus shares credit, you can check with your DP. From the initial announcement to the final bonus shares transfer to Demat, the process is simple but requires careful attention to details like the record date and eligibility criteria. By following the necessary steps and keeping track of the company’s announcements, you can ensure that you receive your bonus shares without any bonus shares credit delay. Also, check the bonus share in Demat Account date to estimate the timeline.

Also Read: Understanding the types of Demat accounts

Frequently Asked Questions

1. How long does it usually take for bonus shares to be credited?

It generally takes 2-3 weeks from the record date for bonus shares to be credited to your Demat Account. However, this timeframe of bonus share allocation Demat Account may vary based on the company’s internal processes.

2. Can bonus shares affect the total value of my investment?

No, bonus shares do not directly affect the total value of your investment. While the number of shares increases, the market price per share usually adjusts proportionately, keeping the overall value unchanged.

3. What should I do if my bonus shares aren't credited on time?

If your bonus shares are not credited on time, contact your broker or the company’s registrar to check the status. They will check and assist with the process if needed.

4. Are there any charges for the credit of bonus shares?

There are no charges for the credit of bonus shares. The process is free of cost, as these shares are issued by the company itself.

5. How can I confirm the credit of bonus shares in my Demat Account?

You can confirm the credit of bonus shares by logging into your Demat Account and checking your updated holdings. If there is a discrepancy, contact your Demat Account provider for assistance.

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.