It’s a common practice among Nepali companies to distribute bonus shares. Among the upcoming bonus shares in Nepal, Adhikhola Laghubitta Bittiya Sanstha Limited (AKBSL) is distributing the most impressive bonus share of 30%. Among some other companies, Nirdhan Utthan Lagubhitta is also distributing a bonus of 19%. Let’s go over the complete details of upcoming bonus shares in Nepal.
Companies pay dividend as a benefit to investors for investing in a company. Bonus Share is a way of paying back the investors without actually distributing cash.
If a company chooses to give bonus shares, then you’ll have more shares of the company that you originally held. For example, if you have 100 shares of a company, and the company gives out 25% bonus shares, then you’ll have 125 shares of the company.
Distributing bonus shares decreases the value of each individual share as the same cap is now divided into more shares. But it can be beneficial in the long run when the company distributes cash dividend. In Nepal, you get cash dividend on the face value per share, i.e 100 NRs. So if a company decides to distribute 10% bonus share, you’d have gotten 10 NRs per share. In total you’d have got 1000 NRs for 100 shares. But after receiving bonus shares, you have additional 25 shares, so you’ll get 1250 NRs.
The the market cap of the company remains same after bonus share issuing, but the total number of shares among which the market cap is divided has increased, the price of each individual share decreases. Here’s the formula using which the new price of a share is calculated after the bonus shares are issued.
There can be a few reasons why a company doesn’t give bonus shares, but it all boils down to one final reason. The company can’t or doesn’t want to distribute cash. It can have several reasons.
Although it might seems like a company having low cash reserves if it doesn’t distribute cash dividends. But it’s not so in most cases. Some common reasons a company distribute bonus shares and not cash dividends are:
- Retain Profits: The company might want to have cash in hand for further growth operations.
- Tax Benefits: Cash distribution for dividend is liable to tax, where as bonus share doesn’t incur taxes.
- To Maintain Good Cash Liquidity
To get bonus shares of a company, you do not need to apply for bonus shares. The bonus shares of a company is directly deposited in your Demat account and you can see the bonus share in your Meroshare account after the distribution. If a company distributes 25% bonus shares, then you’ll have additional 25% shares in your demat account of that company.
You don’t need to apply for bonus shares, you just need to hold the shares of the company in your DEAMT account before the book-closure date of the company.
Adhikhola Laghubitta Bittiya Sanstha Limited (AKBSL) is distributing the highest bonus share of any company in the upcoming bonus share list.
| Company | Book Closure Date | Bonus Share % | Cash % | Total Dividend |
|---|---|---|---|---|
| Premier Insurance Company Nepal Limited (PIC) | 6th January, 2023 [Poush 22, 2079] | 5% | 10% | 15% |
| Mero Microfinance Laghubitta Bittiya Sanstha Limited (MERO) | 6th January, 2023 [Poush 22, 2079] | 10% | 10% | 20% |
| IME General Insurance Limited (IGI) | 11th January, 2023 [Poush 27, 2079] | 6% | 0.316% | 6.316% |
| Neco Insurance Company Limited (NIL) | 17th January, 2023[Magh 3, 2079] | 15% | 0.79% | 15.79% |
| Adhikhola Laghubitta Bittiya Sanstha Limited (AKBSL) | 17th January, 2023[Magh 3, 2079] | 30% | 1.58% | 31.58% |
| Union Life Insurance Company Limited (ULI) | 30th January 2023 [Magh 16, 2079] | 8.97% | – | 8.97% |
| Shikhar Insurance Company Limited (SICL) | 31st January 2023 [Magh 17, 2079] | 16% | 0.8421% | 16.8421% |
| Prudential Insurance Company Limited (PICL) | NOT-ANNOUNCED | 6.5% | 0.342% | 6.84% |
| Arun Valley Hydropower Development Company Limited (AHPC) | 1st February 2023 [Magh 18, 2079] | 8% | 0.421% | 8.421% |
| Guheswori Merchant Banking & Finance Limited (GMFIL) | 3rd February 2023 [Magh 20, 2079] | 6.50% | 0.34% | 6.84% |
| Jyoti Bikas Bank Limited (JBBL) | 12th February, 2023[Magh 29, 2079] | 3% | 3.80% | 6.80% |
| Nirdhan Utthan Laghubitta (NUBL) | 14th February, 2023[Falgun 2, 2079] | 19% | 1% | 20% |
| Infinity Laghubitta Bittiya Sanstha Limited (ILBS) | 14th February, 2023[Falgun 2, 2079] | 20% | – | 20% |
| Api Power Company Limited (API) | 16th February 2023, [Falgun 2, 2079] | 7.5% | 0.3947% | 7.8947% |
| Upakar Laghubitta Bittiya Sanstha Limited (ULBSL) | 18th February 2023, [Falgun 4, 2079] | 61.75% | 3.25% | 65% |
| Mahila Laghubitta Bittiya Sanstha Limited (MLBSL) | 19th February 2023, [Falgun 5, 2079] | 47.5% | 2.5% | 50% |
| Mithila Laghubitta Bittiya Sanstha Limited (MLBBL) | 19th February 2023, [Falgun 5, 2079] | 15% | 0.789473681% | 15.789473681% |
| Swabalamban Laghubitta Bittiya Sanstha Limited (SWBBL) | 24th February 2023, [Falgun 10, 2079] | 15% | 6.05% | 21.05% |
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Some benefits of the bonus shares for the company is:
- Gain the trust of existing shareholder
- Attracting more small investors
- More free floating shares of the company
- Retained profits
Bonus shares also have some benefits for the investors. The most common benefits of bonus shares for shareholder are:
- Don’t need to pay tax for bonus shares
- Beneficial in long term as it multiplies their investment
- Increase outstanding share of the investor
In addition of the benefits of distributing bonus shares as we discussed above, there can also be some disadvantages of distributing bonus shares. Some of them are listed below:
- Not all investors, especially short term investors are interested in bonus shares. They might be interested in cash dividend for more cashflow.
- The capital of total shares held is not increased even as the shares held is increase as company’s total market capital is same as before.
- The EPS and dividend yield of the share is decreased as the floating shares is increased for the same amount of earnings. This might make some investors less interested in the future.
- For the company, the cost of administering bonus shares is more than paying cash dividend.
Which upcoming bonus share are you most excited for?
In case you have any queries related to bonus shares, feel free to drop them in the comment section below! Happy Trading 💹