When investors think of bonus shares, they usually picture listed companies like Infosys, TCS, or Reliance announcing free shares to reward their shareholders. But did you know that unlisted companies — those not traded on the stock exchange — can also issue bonus shares?
This lesser-known fact opens an exciting avenue for investors in India’s growing unlisted market. Let’s break it down.
What Are Bonus Shares?
Bonus shares are additional shares given to existing shareholders free of cost, based on the number of shares they already own.
For example, if a company declares a 1:1 bonus, every shareholder gets one additional share for each share they hold.
For example:
If a company announces a 2:1 bonus, it means every shareholder will get 2 new shares for every 1 share they already own.
These shares are issued by capitalizing the company’s free reserves or surplus profits — instead of distributing them as cash dividends.
Essentially, it’s the company’s way of saying:
“We’ve built enough reserves and want to reward you by increasing your shareholding.”
The total value of your investment remains the same initially, but the number of shares increases. Over time, if the company’s valuation rises, those “free” bonus shares can turn into massive gains.
It’s a way for companies to reward shareholders by capitalizing their reserves rather than paying cash dividends.
Bonus Shares in Unlisted Companies
Unlisted companies, like their listed counterparts, can issue bonus shares under Section 63 of the Companies Act, 2013.
The key difference? Since their shares aren’t traded on the stock exchange, the market value of bonus shares depends on internal valuations and business performance — not stock market sentiment.
This makes bonus issues in unlisted firms particularly valuable for early investors, especially if the company is planning a future listing (IPO) or a strategic buyout.
Why Do Unlisted Companies Issue Bonus Shares?
Here are the most common reasons:
- To Reward Existing Investors – Especially promoters or early investors who believed in the company’s vision.
- To Reorganize Share Capital – Bonus issues adjust the paid-up capital structure without affecting total net worth.
- To Increase Liquidity Among Stakeholders – More shares mean easier internal transfers and valuation flexibility.
- To Prepare for an IPO – Companies often issue bonus shares before going public to align share price and capital base.
Investor Benefits
If you own shares of an unlisted company and it declares a bonus issue, here’s what you gain:
- Higher Shareholding – You get additional shares without spending extra money.
- Lower Average Cost per Share – Your investment cost per share reduces, increasing future return potential.
- Tax Efficiency – Bonus shares are not taxed at the time of issue. Capital gains apply only when you sell them.
- Value Growth – If the company eventually lists, your bonus shares could multiply your profits significantly.
Points to Keep in Mind
While bonus shares are rewarding, they come with a few cautions:
- The book value per share decreases after a bonus issue, since capital is spread over more shares.
- The actual liquidity in unlisted shares depends on the company’s buyback or resale options.
- Always verify the company’s financial health before investing — bonus shares from a weak balance sheet offer little value.
Key Things to Remember
Before you celebrate a bonus announcement, keep these points in mind:
- No Immediate Increase in Value: The total valuation remains constant; only the number of shares changes.
- Dilution of Per-Share Value: The value per share decreases after a bonus, though your total investment value stays the same.
- Limited Liquidity: Since unlisted shares don’t trade publicly, your ability to sell bonus shares depends on company policies or private buyers.
- Due Diligence Is Crucial: Check the company’s financial health, reserves, and long-term growth plans before assuming future gains.
Example: How a Bonus Issue Can Multiply Wealth
Let’s say you buy 1,000 shares of an unlisted company at ₹100 each — an investment of ₹1,00,000.
After one year, the company announces a 1:1 bonus issue, so you now hold 2,000 shares.
Later, the company goes public, and the share price during IPO is ₹500.
Your total investment is still ₹1,00,000 —
but your holdings are now worth ₹10,00,000 (2,000 × ₹500).
That’s a 10x return, and your effective cost per share is now just ₹50.
This is how bonus shares, combined with business growth and eventual listing, can turn small early investments into substantial profits.
Bonus Shares and the Growing Unlisted Market in India
faster than ever, and unlisted share trading platforms like Beesawa Industries are making it easier for investors to access pre-IPO opportunities.
In this environment, bonus shares are becoming a powerful tool for value creation:
- They reward early backers.
- They attract new investors.
- They help companies build strong, loyal shareholder bases before going public.
At Beesawa Industries, we closely monitor companies offering bonus issues in the unlisted space, as they often signal upcoming growth or restructuring — valuable insights for our investor network.
Final Thoughts: Why You Should Care About Bonus Shares
Bonus shares may not seem as glamorous as IPOs or stock splits, but they often reveal the true potential of a company’s growth journey.
In the unlisted share market, where early access is everything, understanding bonus issues gives investors an edge.
So next time an unlisted company announces a bonus issue, don’t dismiss it as a routine corporate action — it could be a golden signal of wealth creation.
With careful selection, due diligence, and guidance from experts like Beesawa Industries, you can turn these hidden opportunities into real, compounding returns.