A stock split is a process in which a company increases the number of its outstanding shares by proportionally reducing the share price. This makes the stock more affordable for investors while maintaining the overall market capitalization of the company. Here's how it works:
Announcement: The company announces a stock split, specifying the split ratio. For example, in a 2-for-1 split, shareholders will receive 2 shares for every 1 share they own.
Ratio Implementation: Let's say you own 100 shares of a company that's undergoing a 2-for-1 split. After the split, you would have 200 shares (2 shares for each original share), and the share price would be halved.
Price Adjustment: The share price is adjusted to reflect the split ratio. For instance, if the stock was trading at ₹100 per share before the split, it might adjust to ₹50 per share after the 2-for-1 split.
Demat Account: The new split-adjusted shares are then credited to your Demat account. Your total investment value remains the same – in the 2-for-1 example, if you had ₹10,000 worth of shares before the split, you would still have ₹10,000 worth of shares after the split, but now in the form of twice the number of shares.
Regarding the timeline for bonus shares:
The time it takes for bonus shares to be credited to your demat account can vary based on various factors, including the company's processing procedures and regulatory requirements. Generally, it takes around 15 to 30 days for bonus shares to be reflected in your demat account after the company's announcement. However, this can change, so it's advisable to keep an eye on announcements from the company and stay informed about the specific dates related to the bonus issuance.