Definition
Bonus vs Split (Difference)
A bonus issue gives free extra shares from reserves, while a stock split divides existing shares into more shares with a lower face value, neither changes total value.
In a bonus issue, the company capitalises its reserves to issue free shares (e.g., 1:1 doubles your shares), so reserves fall but capital rises; face value stays the same. In a stock split, one share is divided into several (e.g., ₹10 face value split into two ₹5 shares), increasing share count without touching reserves.
In both cases your total holding value is unchanged, you just own more shares at a proportionately lower price, improving liquidity and affordability. The key distinction is accounting: a bonus moves money from reserves to capital, a split merely sub-divides the face value.
Related terms
- Stock SplitA stock split divides each existing share into multiple shares by lowering the face value, increasing the share count and reducing the per-share price without changing total value.
- Face ValueFace value (par value) is the nominal value of a share as stated by the company, often ₹1, ₹2 or ₹10.
- Bonus IssueA bonus issue is the free allotment of additional shares to existing shareholders, funded out of reserves, in proportion to their holdings.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.