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Wipro, a prominent IT company headquartered in Bengaluru, has announced that its board of directors will convene a meeting in October to deliberate on the issuance of bonus shares. This crucial decision will be communicated alongside the company's financial results for the second quarter of fiscal year 2025. The prospect of bonus share issuance has sparked interest among investors and analysts alike, as it signifies potential benefits for shareholders.
A bonus issue, as defined in corporate finance, involves a company distributing free shares to its existing shareholders. This practice can be viewed as an alternative to traditional dividend payments, offering shareholders a different form of reward for their investment. The primary rationale behind bonus share issuance lies in enhancing the liquidity of the company's stock in the market. By increasing the number of shares available for trading, it becomes easier for investors to buy and sell shares, fostering greater market activity. However, it is crucial to understand that while the total number of shares outstanding increases in a bonus issue, the overall value of the investment remains unchanged. The underlying value of the company and its assets remains the same, simply divided among a larger number of shares.
Wipro's last bonus share issuance occurred in 2019, when the company distributed one bonus share for every three shares held by shareholders. The upcoming board meeting, scheduled for October 16-17, will be pivotal in determining whether the company will proceed with another bonus share issue. The company's official statement highlights the adherence to relevant regulations, stating that the board will consider the proposal for bonus share issuance in accordance with the provisions of the Companies Act, 2013, and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018. The outcome of the board meeting will be promptly communicated to stock exchanges upon its conclusion on October 17.
Source: Wipro to consider bonus share issuance in October board meeting