In 21 years, 1 lakh has increased by more than 100 times to 1.12 crore thanks to PSU stock giving bonus shares four times. Bonus shares were issued by IOCL in 2009, 2016, 2018, and 2022.
Stock market investments produce returns through dividends, bonus shares, share buybacks, rights, etc. in addition to the appreciation of the portfolio stocks. Market analysts claim that a long-term investor has a better probability of obtaining these types of investments than a short-term one. Considering that these announcements are not often made. Let’s take bonus shares as an illustration.
A corporation will occasionally announce bonus shares, on average. However, several publicly traded companies often distribute bonus shares to their stockholders. A clear illustration of this is the Indian Maharatna Company, Indian Oil Corporation Limited, or IOCL shares. In the past 20 years, the PSU stock has awarded bonus shares four times. In the past twenty years, the Indian Maharatna Company had not granted bonus shares for four to five years. Knowing that if a person had invested one lakh in this stock 21 years ago, their one lakh would have increased 100 times is necessary to comprehend how these bonus shares were successful in improving the stock investment yield for a long-term investor.
History of IOCL bonus shares
The state-owned oil production firm has granted bonus shares in 2009, 2016, 2018, and 2022 over the past 21 years. In October 2009, it first offered bonus shares in a 1:1 ratio, meaning one bonus share for every equity share owned by stockholders. The PSU business once more announced bonus shares in a 1:1 ratio in October 2016. IOCL announced bonus shares in a 1:1 ratio in March 2018. The last time bonus shares from IOCL were granted was in June 2022. At June 2022, IOCL announced bonus shares in a 1:2 ratio, meaning that the shareholder would receive one bonus share for every two equity shares they own.
Impact of bonus shares
An investor would have received 14,285 shares of IOCL if he had invested one lakh rupees in the company roughly 21 years ago when the share price was around seven rupees per share. Its net shareholding would have increased to 28,570 after the issuing of bonus shares in a 1:1 ratio in 2009. After the issuing of bonus shares at a 1:1 ratio in 2016, this would have increased by another doubling to 57,140. Similar to this, following another 1:1 bonus share issue in 2018, these 57,140 IOCL shares would have increased to 1,14,280 shares. The IOCL announced 1:2 bonus shares in June 2022, which would have increased the stockholders’ net shares to 1,71,420. Therefore, a long-term shareholder’s net shareholding increased 12 times as a result of the bonus share issuance.
1 lakh becomes 1.12 crore.
Given that the current share price of IOCL is 65.75 and that each investor currently owns 1,71,420 shares, In other words, if the shareholder had stayed engaged in the stock for the whole time included in the calculations above, the absolute value of a 1 lakh rupee investment made 21 years ago would have been 1,12,70,865 or 1.12 crore.