Who doesn’t love receiving a Diwali or annual bonus at work? It feels like a token of appreciation for your hard work and adds a little extra to your wealth. In the world of investing, bonus shares offer a similar sense of reward, allowing investors to increase their stake in a company—without any additional cost. Companies often issue these bonus shares to distribute profits while managing their capital structure efficiently.
If you’re looking for long-term wealth-building strategies, investing in companies that regularly reward shareholders with bonus shares can be a fruitful option. In this blog, we explore five top Indian companies that have consistently issued bonus shares over the years.
1. Wipro: The Bonus Giant
Leading the pack is Wipro, a company often regarded as India’s “bonus giant.” Wipro has a long history of rewarding shareholders, having issued bonus shares 13 times—the most of any company on the Nifty 50 index. The most recent bonus issue was in 2019, with the company distributing one bonus share for every three held. In 2024, Wipro made headlines again by announcing its 14th bonus issue, with a 1:1 ratio.
Wipro’s strength lies in its solid financials, with Rs 40,810 crore in cash and equivalents as of March 2024. Even though the company saw a slight decline in revenue and profit in FY24, it has maintained a healthy Return on Equity (RoE) of 17.3%. As Wipro pivots towards emerging technologies like quantum computing and strengthens its cybersecurity services, shareholders can expect the company to continue rewarding them generously.
2. Larsen & Toubro (L&T): Engineering Excellence with Shareholder Rewards
Coming in second is Larsen & Toubro (L&T), a blue-chip engineering conglomerate with a rich history of issuing bonus shares 10 times. The first was in 1964, and the most recent one came in 2017. If you had held L&T shares since 2006, your holdings would have multiplied ninefold!
L&T’s diversified business spans infrastructure, defense, and renewable energy, making it one of India’s largest and most financially robust companies. With Rs 503.2 billion in cash reserves and a solid 20.6% revenue growth in FY24, L&T is also eyeing the future with its ambitious plans to invest nearly $4 billion in green hydrogen and renewable energy projects.
3. Infosys: Technology Meets Consistency
Third on the list is Infosys, another tech giant with a reputation for shareholder rewards. Infosys has issued bonus shares eight times, with the most recent one in 2018. As of March 2024, Infosys held Rs 39,010 crore in cash reserves, further demonstrating its ability to reward shareholders consistently.
Infosys has posted impressive financial growth, with a 4.7% increase in revenue and an 8.9% rise in net profit in FY24. Over the last five years, Infosys has maintained a RoE of 28.6% and is now focused on growth opportunities in quantum computing and digital transformation. For shareholders, Infosys remains a reliable source of long-term value through bonus shares and dividends.
4. ITC: FMCG Giant with a Bonus History
Known for its dominance in the FMCG sector, ITC has issued bonus shares seven times since its inception, with the latest in 2016. ITC, which started as a tobacco company, has diversified into various sectors such as hotels, paperboards, and agribusiness. Despite this diversification, ITC still controls 78% of India’s tobacco market.
In FY24, ITC posted Rs 64,920 crore in revenue and Rs 20,750 crore in net profit. The company boasts a RoE of 25.9% and a RoCE of 34.3%, and its management remains optimistic about future growth, particularly in its cigarette business. For long-term investors, ITC’s consistent bonus issues have been a reliable way to grow their holdings.
5. Cipla: Pharma Giant with a Bonus History
Rounding out our list is Cipla, a pharmaceutical giant that has issued bonus shares seven times. Cipla has a strong presence in therapeutic segments like respiratory, cardiovascular, and anti-retrovirals, with well-known products such as Nicotex and Cofsils.
Despite a slowdown in the broader pharmaceutical industry, Cipla has managed to grow its sales at a 10% CAGR over the last five years, while its net profit has risen at a 25% CAGR. The company remains debt-free and maintains strong financials with a RoE of 16.8% and RoCE of 22.8%. Cipla’s focus on emerging markets and its strategic partnership with Sanofi India will likely bolster its growth in the coming years.
Why Bonus Shares Are a Win-Win for Investors
Bonus shares are an exciting way for companies to reward shareholders. Here’s why investing in companies that regularly issue bonus shares can be beneficial:
- Increased Shareholding: Bonus shares give you more ownership in the company without any extra cost.
- Enhanced Liquidity: Bonus shares increase the number of shares in circulation, making it easier to buy or sell the stock.
- Long-term Wealth Accumulation: Companies that regularly issue bonus shares are often financially sound, making them a safer bet for long-term investment.
However, it’s important to note that bonus shares don’t directly increase the value of your investment immediately. The share price adjusts in proportion to the number of bonus shares issued, so the overall value remains the same in the short term. Unlike dividends, which provide cash returns, bonus shares offer no immediate payout. Instead, they are ideal for investors focused on long-term growth.
Final Thoughts: Investing in Companies with a History of Bonus Shares
Companies that consistently reward shareholders with bonus shares demonstrate a commitment to distributing wealth and maintaining strong financial health. Wipro, L&T, Infosys, ITC, and Cipla have set a benchmark in this regard, making them attractive options for investors looking to grow their portfolios.
If you’re an investor seeking long-term wealth accumulation, these companies offer a rewarding investment strategy through their bonus share policies. While bonus shares may not deliver immediate cash returns, they build a foundation for increased ownership, liquidity, and long-term value—making them a powerful tool for wealth creation.
By focusing on companies that have a strong track record of issuing bonus shares, you can enjoy the rewards of holding a larger stake in the business without spending extra. Bonus shares, like workplace bonuses, represent a way to feel appreciated and grow your wealth at the same time!
Disclaimer:
The information provided in this blog is for educational and informational purposes only. It should not be considered as financial or investment advice. Always conduct your own research or consult a financial advisor before making any investment decisions. The author is not responsible for any financial losses or decisions made based on the content of this blog. Investing in the stock market involves risks, and past performance is not indicative of future results.
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