HDFC Bank bonus shares explained: Share price may fall 50%, but holding doubles
For HDFC Bank, the bonus has been declared in the ratio of 1:1 — one extra share for every share held. On Monday, its stock settled at Rs 1,964.50 on BSE.
- Aug 26, 2025,
- Updated Aug 26, 2025 8:35 AM IST
HDFC Bank is set to turn ex-date for its bonus issue on Tuesday, marking another big corporate action in 2025. With this move, the country’s most valuable lender will join the ranks of BSE500 peers such as Nestle India, Bajaj Finance, Ashok Leyland, Samvardhana Motherson International, Container Corporation of India, Motherson Sumi Wiring, Anand Rathi Wealth, Indraprastha Gas and Garware Technical Fibres, all of which have carried out bonus this year.
For HDFC Bank, the bonus has been declared in the ratio of 1:1 — one extra share for every share held. On Monday, its stock settled at Rs 1,964.50 on BSE. But when markets open today, the price will automatically adjust in line with the bonus. On some trading apps, this may appear as a sudden 50 per cent plunge, but investors have little reason to panic. The fall would only be optical, as their holdings simply double with the issue of fresh shares. There is no dilution of equity.
What makes bonus shares attractive for investors is that they come free of cost. HDFC Bank will draw on its free reserves and surplus to issue the additional shares, which will carry the same face value as the existing ones.
The impact of a bonus issue is straightforward: it increases the number of shares in circulation, which trims down the company’s free reserves and lowers earnings per share (EPS). As a result, the stock price adjusts downward.
A recent example lies in Ashok Leyland’s bonus announcement. The automaker’s stock closed at Rs 250.85 a day before turning ex-date, only to open at Rs 125.70 the next day. On screens, it looked like a steep crash, but in reality, shareholders simply owned two shares for every one they previously held. Similarly, Bajaj Finance recently combined a stock split with a bonus issue — splitting its shares 1:2 and offering a 4:1 bonus. Nestle India too has carried out similar corporate action this year.
While both bonus issues and stock splits may appear similar, their purpose is different. A bonus issue rewards shareholders with free additional shares, funded out of accumulated earnings, while keeping the face value unchanged. A stock split, on the other hand, breaks existing shares into smaller units to boost liquidity, which reduces the face value. For instance, in a 1:5 stock split, each share is divided into five, with the dividend entitlement shrinking proportionally. In a bonus issue, however, the dividend entitlement remains unaffected.
As far as HDFC Bank fundamentals are concerned, S&P Global ratings last week said it expects HDFC Bank to maintain its solid market position, strong capitalization, and low credit costs over the next two years. The outlook also reflects its view that HDFC Bank's strong management and governance structure will continue to underpin its above-average financial performance over the next two years, S&P Global said.
HDFC Bank is set to turn ex-date for its bonus issue on Tuesday, marking another big corporate action in 2025. With this move, the country’s most valuable lender will join the ranks of BSE500 peers such as Nestle India, Bajaj Finance, Ashok Leyland, Samvardhana Motherson International, Container Corporation of India, Motherson Sumi Wiring, Anand Rathi Wealth, Indraprastha Gas and Garware Technical Fibres, all of which have carried out bonus this year.
For HDFC Bank, the bonus has been declared in the ratio of 1:1 — one extra share for every share held. On Monday, its stock settled at Rs 1,964.50 on BSE. But when markets open today, the price will automatically adjust in line with the bonus. On some trading apps, this may appear as a sudden 50 per cent plunge, but investors have little reason to panic. The fall would only be optical, as their holdings simply double with the issue of fresh shares. There is no dilution of equity.
What makes bonus shares attractive for investors is that they come free of cost. HDFC Bank will draw on its free reserves and surplus to issue the additional shares, which will carry the same face value as the existing ones.
The impact of a bonus issue is straightforward: it increases the number of shares in circulation, which trims down the company’s free reserves and lowers earnings per share (EPS). As a result, the stock price adjusts downward.
A recent example lies in Ashok Leyland’s bonus announcement. The automaker’s stock closed at Rs 250.85 a day before turning ex-date, only to open at Rs 125.70 the next day. On screens, it looked like a steep crash, but in reality, shareholders simply owned two shares for every one they previously held. Similarly, Bajaj Finance recently combined a stock split with a bonus issue — splitting its shares 1:2 and offering a 4:1 bonus. Nestle India too has carried out similar corporate action this year.
While both bonus issues and stock splits may appear similar, their purpose is different. A bonus issue rewards shareholders with free additional shares, funded out of accumulated earnings, while keeping the face value unchanged. A stock split, on the other hand, breaks existing shares into smaller units to boost liquidity, which reduces the face value. For instance, in a 1:5 stock split, each share is divided into five, with the dividend entitlement shrinking proportionally. In a bonus issue, however, the dividend entitlement remains unaffected.
As far as HDFC Bank fundamentals are concerned, S&P Global ratings last week said it expects HDFC Bank to maintain its solid market position, strong capitalization, and low credit costs over the next two years. The outlook also reflects its view that HDFC Bank's strong management and governance structure will continue to underpin its above-average financial performance over the next two years, S&P Global said.