Prajna Capital - An Investment Guide

THE Reliance Power bonus issue is finally out and ex-bonus date is also out, its 28 May. The company declared a 3:5 ratio giving three extra shares for every five shares held by a shareholder. These shares were issued to only non-promoter shareholders. The record date for the issue is still to be declared by the stock exchange. What is a bonus issue? Any company, which has excess reserves that it may have build by retaining part of its profit over the years, may decide to convert some amount into its share capital by issuing bonus shares. This doesn’t change the market value of the company. It is one of the ways, in which reserves of the company get capitalized. In case of Reliance Power, the company is converting its share premium reserves into bonus. What is bonus ratio? New shares are issued in the proportion of their holdings. If the bonus ratio is 1:2, for every two shares held by the shareholder, he will get one extra share. This means, if someone was holding 100 shares of a comp...