GAIL India goes ex-bonus in the ratio 1:3 on 27 March 2018, i.e. 1 bonus share issued at Rs.0 for every three shares held in the Demat account of all eligible shareholders.
Effect on Holdings:
When a bonus is issued, the share price drops, in this case by a factor of (1+3)/3 = 1.3333. So if you held GAIL shares at an average price of Rs.425, the price of each share after bonus would adjust to 425/1.3 = Rs.318.75. You’ll be given 1 share at Rs.0 for every three shares held at Rs.426, thereby maintaining your overall investment value.
Please note that a bonus issue only increases liquidity and not your investment value.
P&L drop:
Until the bonus shares are credited to your Demat, your Holdings will show an artificial drop in P&L. Once the bonus shares are credited at an avg price of Rs.0, your P&L in Kite/Q will be restored to its correct value.
You will receive an SMS from CDSL when your bonus shares are credited to your Demat which could take upto 2 weeks.
Adjustments for Futures & Options Contracts:
- Strike Price: The adjusted strike price shall be arrived at by dividing the old strike price by the
adjustment factor. - Market Lot: The adjusted market lot shall be arrived at by multiplying the old market lot by the
adjustment factor. The revised market lot would be 2667.
An example of the adjustments described above is given in Annexure 1.
Refer the circular for more. To know more about the impact of corporate actions on stock prices, check this chapter on Varsity.