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ITC bonus shares: Successful stock market investors frequently tell their followers to stick onto a stock for as long as possible. The fundamental idea behind this advice is to reduce risk and open up additional income streams that long-term equities investors enjoy over short-term investors. A long-term investor benefits from share buybacks, bonus shares, dividends, etc. that a listed firm occasionally announces in addition to stock price growth.
We must examine ITC share price history to see how these additional sources of income may affect a long-term stock market investor’s return. In the past 20 years, the stock has granted bonus shares three times. In over two decades, the price of an ITC share has increased about 23 times, from roughly ₹14.50 to ₹331.50 per share. However, if we take into account the three bonus shares that the business has issued over the past 20 years, the ITC share price would have increased by 102 times. Thus, the FMCG company’s three bonus shares enhanced its long-term investors’ return by more than four times.
According to data on the BSE website, ITC has three times in the past 20 years offered bonus shares. In September 2005, it distributed bonus shares in a ratio of 1:2, meaning that an investor received one bonus share for every two business shares they owned. ITC once again distributed bonus shares in August 2010 on a 1:1 ratio, awarding one bonus share for each ITC share owned by the shareholder. ITC later offered bonus shares with a 1:2 ratio in July 2016.
An investor would have received one ITC share at around ₹14.50 per share if they had invested one lakh in ITC equities 20 years ago in the month of June. In June 2002, one would have received 6,896 ITC shares for investing one lakh rupees in ITC equities.
The total number of ITC shares owned by the shareholder would have increased to 10,344 following the issuance of 1:2 bonus shares in September 2005. (6,896 x 1.5). Similar to how these 10,344 ITC shares would have increased to 20,688 following the 1:1 ratio bonus share distribution in August 2010. The value of these 20,688 ITC shares would have increased to 31,032 ITC shares when the FMCG business offered 1:2 bonus shares in July 2016.
So, if an investor had invested ₹1 lakh in the stock paying ₹1 lakh in June 2002, their stake in ITC would have increased from 6,896 to 31,032.
₹1 lakh turns to ₹1.03 crore
ITC’s stock price on the NSE finished at a price of ₹331.50 per share on Friday. As a result, the net value of an investor who invested one lakh in ITC in June 2022 increased to one crore (331.50 times 31,032). If the business had not declared any bonus shares at this time, an investor’s investment of Rs. 1 lakh would have grown to Rs. 23 lakh because the stock increased by around 23 times during the previous 20 years (331.50/14.5).
Thus, long-term bonus-paying shares have the potential to turn a millionaire into a billionaire.