Equity Bonus shares clarification required

#1
Hi,

I need following clarification about 1:1 equity bonus. Please help me.

Suppose on 20-Jun-2011 XYZ company announced that company will issue 1:1 bonus shares.
Say
Ex-Bonus date : 28-Jun-2011
Record Date : 29-Jun-2011
Book Closure : 30-Jun-2011 to 1-Jul-2011

Scnario 1:
Suppose if I purchase 200 quantity of XYZ company shares(Delivery) on 24-Jun-2011, my shares will be credited in my demat account on T+2 ie 26-Jun-2011.
On Ex-Bonus date share value become half.
If I sell share on 27-Jun-2011 ie day before Ex-Bonus date, will I get bonus shares or not?

Scnario 2:
Suppose if I purchase 200 XYZ company shares on 27-Jun-2011 ie day before Ex-bonus date, my shares will be credited in my demat account on T+2 ie 29-Jun-2011.
But If I sell share on 28-Jun-2011 itself ie on Ex-Bonus date, will I get bonus shares or not?

Scnario 3:
Suppose if I purchase 200 XYZ company shares on 26-Jun-2011, my shares will be credited on T+2 ie 28-Jun-2011.
But If I sell share on 27-Jun-2011 itself ie a day before Ex-Bonus date, will I get bonus shares or not?

Scnario 4:
Suppose If the above Record Date is changed to 30-Jun-2011, will the same above answers applicable for the above questions.

Question 1:
Suppose if I sell shares from demat account on 28-Jun-2011 (T), how many date will it required to debit from my demat account. T+1 (29-Jun-2011) or T+2 (30-Jun-2011)

Thanks in Advance
 

adityasaraf007

Well-Known Member
#2
The point is you must hold the shares on the Closing of 27-Jun-2011; ie; on the Closing of the Trading day just before Ex-Date........ It doesn't matter when you purchase and sell them........ Here, "hold" doesn't mean it should be in your Demat Account. Answers to your scenarios whether you would get the Bonus or not are as follows:

1. No
2. Yes
3. No
4. Yes

Regarding Question1: Depends on your DP. My DP debits it on T+1

Aditya
 
#3
Thanks Aditya for your valuable reply.

Still I have some more doubts.
On Ex-Bonus date, share price will be half, Am I correct?

No transaction will happen on Ex-Bonus date, if i sell on Ex-Bonus date, still my name will be there on record date also. Still there is a possibility of getting bonus. Is my understanding correct or not?

I analyzed the following stocks which are provided Equity 1:1 bonus shares

ONGC
Ex-Bonus Date : 08-02-2011
Record Date : 09-02-2011

MANAPPURAM
Ex-Bonus Date : 09-06-2011
Record Date : 10-06-2011

TITAN Industries
Ex-Bonus Date : 23-06-2011
Record Date : 24-06-2011

Huge volume of selling happened on the day before ex-bonus date. Does it mean like they will sell the CMP(before split occur) and get the bonus(extra gain)?
If they are not selling a day before ex-bonus date, next day price will half, later they will get 1 bonus.

Split share price + bonus share price = share price which was in a day ex-bonus
Example
on 08/06/2011 MANAPPURAM open price was 119.50 on 09/06/2011 open price was 59.85
59.85 (split share price) + 59.85 (bonus share price) = 119.50 (share price which was in a day ex-bonus).
No gain at all. What is purpose of selling on a day before ex-bonus date?

Does anyone have experience that sold shares(which are in Demat account) on a day before ex-bonus date and received bonus shares?
 
Last edited:

rvm123

Active Member
#4
It is not possible. In case, if this happens, u are bound to return the bonus shares to the other party who is eligible for the bonus.
 
#5
rvm123,

If it is not possible, why huge number selling is happening on a day before ex-bonus date. I have analysed most shares which are provided bonus share. Always huge number of share selling is happening on a day before ex-bonus date
 

adityasaraf007

Well-Known Member
#6
Thanks Aditya for your valuable reply.

Still I have some more doubts.
On Ex-Bonus date, share price will be half, Am I correct?
NO.... The price becomes half only when the bonus is 1:1.... I would give you an example:

If the shares of XYZ Co. is Trading at Rs 300/- and the company announces a Bonus of 1:2; ie; 1 Shares for every 2 Shares held in the Co....... Suppose, you held 2 shares on the Eve of Ex-Date......

Then, on the Ex-Date you would have 3 shares instead of 2...... So, the Price of the Shares would become 300*2/3 = Rs 200........

Similarly, if the company announced a Bonus of 2:5 (2 shares for every 5 held);

Price on ex-date = 300*5/7= Rs 214

To generalize the formula: (Price of the Eve of Ex-Date * No. of Shares before Bonus) / (No. of Shares after Bonus)....

Hope...... I did not add to your confusion....


No transaction will happen on Ex-Bonus date, if i sell on Ex-Bonus date, still my name will be there on record date also. Still there is a possibility of getting bonus. Is my understanding correct or not?
If you held the shares on the Eve of Ex-Date..... you would be eligible to get the Bonus Shares......

I analyzed the following stocks which are provided Equity 1:1 bonus shares

ONGC
Ex-Bonus Date : 08-02-2011
Record Date : 09-02-2011

MANAPPURAM
Ex-Bonus Date : 09-06-2011
Record Date : 10-06-2011

TITAN Industries
Ex-Bonus Date : 23-06-2011
Record Date : 24-06-2011

Huge volume of selling happened on the day before ex-bonus date. Does it mean like they will sell the CMP(before split occur) and get the bonus(extra gain)?
If they are not selling a day before ex-bonus date, next day price will half, later they will get 1 bonus.

Split share price + bonus share price = share price which was in a day ex-bonus
Example
on 08/06/2011 MANAPPURAM open price was 119.50 on 09/06/2011 open price was 59.85
59.85 (split share price) + 59.85 (bonus share price) = 119.50 (share price which was in a day ex-bonus).
No gain at all. What is purpose of selling on a day before ex-bonus date?
Generally speaking, volumes surge because there is some time lag between the Ex-Date and the Date on which Bonus is actually credited to your Demat Account.... So, Short Term Traders get into the action.....

Does anyone have experience that sold shares(which are in Demat account) on a day before ex-bonus date and received bonus shares?
Today..... there is no manual intervention.... It happens automatically.... So, were negligible chance....

With regards,
Aditya