Stock Market · Introduction to Stock Markets

Corporate actions

Companies do more than just run their business. They regularly adjust their share structure or return money to shareholders. These events are corporate actions.

Dividend, company shares profits with shareholders. 100 shares × ₹5 dividend = ₹500 deposited in your bank on the ex-dividend date. Consistent dividends signal stable cash flow.

Bonus shares, company gives you extra shares for free. 1:1 bonus = for every share you own, you get one more. You now have double the shares, but the price halves. Total value stays the same. Purpose: more shares in circulation = more liquidity = easier for retail to participate.

Stock split, reduces the per-share price to make it accessible. A 2:1 split of a ₹2000 stock → 2 shares at ₹1000 each. Same total value, lower per-share price.

Buyback, company uses its own cash to repurchase shares from the market. Fewer shares outstanding = each remaining share is worth more. Usually signals management thinks the stock is undervalued.

> TCS has run multiple ₹16,000–18,000 crore buybacks. Each time, shareholders who tendered shares got premium pricing. Each time, the remaining share count shrank. Slightly increasing value per share.

Buybacks are no longer a tax-free way to take cash out. Since October 2024 the proceeds are taxed in the shareholder's hands, and the head under which they are taxed has been rewritten since, so check the rule for the year the money actually reaches you before deciding whether to tender.

Key date to know: ex-date

You must own shares BEFORE the ex-date to be eligible for any corporate action (dividend, bonus, split). Buy after the ex-date and you get nothing for that round.

₹17,000 crTCS buyback size in 2023

1:1Last Infosys bonus issue (2018)

Takeaway. Corporate actions adjust how value is distributed, not the total value itself. Except buybacks, which concentrate ownership.