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SEBI guidelines for Bonus Issues

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What are bonus shares??

Free share of stock given to current shareholders in a company of the reserves of the company the total number of shares issued and owned per share of the stock will drop in proportion to the new issue is compensated by the fact that share holder will own more shares the value of the investment should remain the same although the price will adjust accordingly

capitalization Increases

Earnings

This

Therefore

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General Guidelines
Articles

of association by share holders

Sanctioned Within Prior

authorized capital

permission from Financial institution if any loan availed from them issued to non resident members prior consent of RBI must be taken with issued by SEBI must be compiled

If

Guidelines

SEBI GuidelinesChapter XV of SEBI( Disclosure & Investor Protection) Guidelines, 2000

1.

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Pending conversion of FCDs/PCDs reserved bonus shares The shares so reserved may be issued at the time of conversion- same terms on which the bonus issues were made Made out of free reserves built out of the genuine profits or share premium Reserves created by revaluation of fixed assets are not capitalized The declaration of bonus issue, in lieu of dividend, is not made

2.

3.

4.

5.

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Cont
The

bonus issue is not made unless the partlypaid shares, if any existing, are made fully paid-up not defaulted in payment of interest or principal in respect of fixed deposits and interest on existing debentures or principal on redemption thereof has not defaulted in respect of the payment of statutory dues of the employees such as contribution to provident fund, gratuity, bonus etc the proposal of issuing bonus shares within a period of_______ months from

Has

it

implement

Reliance Power Bonus Issue-March 2008

Reliance Was

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Power came with IPO in January 2008

oversubscribed 10.52 times at close of the first day of the offer opening for subscription fell by 990 points after two weeks after listing

Market

Issued

bonus shares compensating investors for the sharp fall in stock price of 3 shares for every 5 shares held to existing shareholders excluding promoters has moved up by over 10 per cent next day

Ratio

Issued

stock

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Cont
Bonus

shares resulted in reduction of the cost of Reliance Power shares below the IPO price as follows: Rs 269 per share for retail investors, 40% lower than the IPO price of Rs 430. Rs 281 per share for other investors, 37% lower than the IPO price of Rs 450. analysts believe that the Reliance Power Bonus Issue has been announced as part of the managements admission that the issue was overpriced and it is a correction move to correct the aggressive pricing at which the IPO was offered

market