Part of the guide: Dividends, stock splits, bonus issues, buybacks and rights issues explained
Corporate actionsStock split versus bonus issue: the difference explained with an example
Both increase the number of shares, and both adjust the price per share. What differs is the accounting: a split changes face value, a bonus converts reserves into shares.
A stock split and a bonus issue look alike from a holder’s side: you end up with more shares. They are different actions inside the company.
Side by side (illustrative numbers)
Suppose a holder has 100 shares worth ₹1,000 each, a total of ₹1,00,000, and the company has ₹50 crore of reserves.
| 1:2 stock split | 1:1 bonus issue | |
|---|---|---|
| Shares after | 200 | 200 |
| Price per share after (adjusted) | about ₹500 | about ₹500 |
| Holder’s total value, before market moves | ₹1,00,000 | ₹1,00,000 |
| Face value per share | halves | unchanged |
| Reserves | unchanged | reduced; converted into share capital |
What is the same
- The number of shares rises and the per-share price is adjusted downward.
- The company is the same size and each holder owns the same proportion of it.
- Per-share figures, such as EPS, are restated for earlier periods.
What is different
- A split changes the face value of each share. Nothing moves between accounts.
- A bonus issues new shares by moving part of the reserves into share capital, so share capital rises and reserves fall by the same amount.
What neither does
Neither adds value to the company, and neither is a payment to shareholders. The market price after either action moves like any other price; this page says nothing about which way.
For the other corporate actions and the record-date mechanics, see dividends, splits, bonus issues, buybacks and rights issues explained.