Bonus Issue Alert: List Of Top 5 Indian Companies Rewarding Shareholders With Bonus Shares Consistently

Who doesn't love receiving a Diwali or annual bonus at work? It's a sign of recognition and adds to your wealth. In the stock market, bonus shares offer a similar sense of reward, adding to your portfolio without any extra cost. Companies issue bonus shares to shareholders as a way to distribute profits and manage their capital structure.

Bonus shares represent additional shares that a company issues to its existing shareholders at no extra cost, sometimes referred to as scrip dividends or capitalization issues. In this article, we will explore five top Indian companies that have consistently rewarded their shareholders with bonus shares over the years.

1. Wipro

Leading the list is Wipro, often regarded as India's "bonus giant." The company has a long history of rewarding shareholders through bonus shares, having issued them 13 times. This makes Wipro the Nifty constituent with the most bonus issues in its history. The most recent bonus issue was in 2019, where the company distributed one bonus share for every three shares held by investors.

Wipro recently announced it would consider issuing bonus shares again, marking the 14th time in its history. The company's board discussed the proposal in a meeting scheduled between October 16 and October 17, 2024 and approved a bonus issue of 1:1.

Wipro's strong financial health backs this consistent bonus policy. As of March 2024, the company had Rs 40,810 crore in cash and cash equivalents. One of India's leading IT services firms, Wipro operates across two main segments: consulting and data engineering, and cloud, digital operations, and cybersecurity.

In FY24, Wipro's revenue saw a slight year-on-year (YoY) decline of 4.2%, down from Rs 23,190 crore to Rs 22,210 crore. Net profit also dropped from Rs 3,090 crore last year to Rs 2,880 crore in Q4FY24. Despite these short-term dips, Wipro has maintained an average Return on Equity (RoE) of 17.3% and a Return on Capital Employed (RoCE) of 22.1% over the last few years.

Looking ahead, Wipro plans to pivot towards emerging technologies like quantum computing while also investing heavily in digital transformation initiatives. With cyberattacks on the rise, Wipro is focusing on strengthening its cybersecurity services.

2. Larsen & Toubro (L&T)

Second on the list is Larsen & Toubro (L&T), the blue-chip engineering and infrastructure conglomerate. L&T has issued bonus shares 10 times since going public, with the first bonus issued in 1964 and the most recent one in 2017. Shareholders who have held onto their L&T shares since 2006 without modifying their portfolio have seen their holdings multiply nine times.

L&T is also one of the largest companies in India in terms of cash reserves, boasting Rs 503.2 billion in cash and cash equivalents as of FY24. The company operates across multiple sectors, including infrastructure, power, defense, and hydrocarbons, with a diversified portfolio that spans over 30 countries.

In FY24, L&T delivered solid financial performance with revenue growth of 20.6%, EBITDA growth of 12.3%, and net profit growth of 23.3%. The company has sustained an average RoCE of 13.3% and RoE of 17.1% over the last five years.

L&T has plans for the future, including a significant investment in green energy. The company plans to invest close to US$4 billion to build 2-3 million tonnes of green hydrogen and ammonia capacity, while also expanding its solar and wind power portfolio.

3. Infosys

Next on the list is Infosys, another tech giant that has regularly rewarded its shareholders with bonus shares. Infosys has issued bonuses on eight occasions, with the first in 1994 and the most recent in 2018.

Infosys, one of India's top IT companies, holds Rs 39,010 crore in cash and cash equivalents as of March 2024. The company provides consulting, technology, outsourcing, and next-generation digital services, with 57% of its revenues coming from digital services.

In FY24, Infosys posted a 4.7% increase in revenue to Rs 1,53,670 crore, while net profit rose by 8.9% to Rs 26,230 crore. The company has grown at an impressive pace over the past five years, with a compound annual growth rate (CAGR) of 13.2% for revenue and 11.2% for net profit. Infosys also boasts an average RoE of 28.6% and RoCE of 39.4%.

Looking ahead, Infosys aims to strengthen its position in quantum computing and anticipates revenue growth in FY25 due to large deal wins in sectors like financial services and telecom.

4. ITC

ITC, a major player in the FMCG sector, ranks fourth on the list. ITC has rewarded shareholders with bonus shares seven times since its inception, with the first bonus issued in 1980 and the latest in 2016.

As of March 2024, ITC holds Rs 630 crore in cash and cash equivalents. Founded in 1910, ITC began as a tobacco and cigarette manufacturer but has since diversified into FMCG, hotels, paperboards, and agribusiness. Despite its diversification, ITC still dominates the Indian tobacco market, controlling nearly 78% of the market share.

In FY24, ITC posted revenues of Rs 64,920 crore and a net profit of Rs 20,750 crore, a 6.5% increase. ITC's RoE and RoCE have been consistently strong, averaging 25.9% and 34.3%, respectively, over the last few years.

Looking forward, ITC's management is optimistic about growth, particularly in its cigarette business, which saw stable volume growth after no changes were made to the cigarette tax rate in the Union Budget 2024.

5. Cipla

Cipla, a pharmaceutical giant, rounds out our top five list. Cipla has issued bonus shares to shareholders seven times, with the first bonus in 1980 and the most recent in 2006.

Cipla is renowned for its expertise in generic formulations and active pharmaceutical ingredients (APIs). The company has a strong presence in the respiratory, cardiovascular, and anti-retroviral segments. Its popular brands include Nicotex, Cofsils, and ORS.

Despite a slowdown in the pharma industry, Cipla's sales have grown at a CAGR of 10% over the last five years, while net profit has grown at a CAGR of 25%. Cipla has maintained a healthy financial profile, with RoE and RoCE at 16.8% and 22.8%, respectively, and a debt-free status.

Looking ahead, Cipla plans to focus on new product development and expand its presence in emerging markets like India and South Africa. The company has also entered a strategic partnership with Sanofi India to distribute Sanofi's Central Nervous System (CNS) product range.

Bonus Shares: A Rewarding Investment Strategy?

Investing in companies that consistently issue bonus shares can be rewarding, but it comes with certain considerations. On the positive side, bonus shares increase your shareholding without any additional cost, allowing you to benefit from a larger stake in the company. They also enhance liquidity, making it easier to trade the stock.

However, bonus shares do not directly increase the value of your investment, as the share price adjusts proportionally to the additional shares issued. Unlike dividends, bonus shares do not provide immediate cash returns, which might not appeal to income-focused investors. Additionally, companies may issue bonus shares as a way to create an illusion of growth, even if their fundamentals aren't as strong.