Investors are likely to ramp-up their investment in Tata Consultancy Services (TCS) after the country's largest software exporter announced a bonus issue of 1:1 for its shareholders.
This will be the third bonus share offering by the company since its listing in 2004.
The ratio of the bonus share offering shows that a shareholder of the company will receive one share for every share held.
Generally whenever a company announces a bonus issue, its share price rises as investors jumps in to get a hold of a piece of the free shares.
Companies like to use bonus issues as a statement of their strong fundamentals going forward and to improve participation and liquidity in their firm.
With TCS going for a bonus offering, the company's stock price will halve the day it becomes ex-bonus. The lower price is expected to attract more retail investors to the counter and increase depth of trading, according to market experts.
This offer will last till the record date after which shares becomes ex-bonus and the purchaser does not have the right to receive the current bonus. The company is yet to declare the date for ex-bonus.
After the bonus offering, TCS share capital will double to Rs 276 crore.
When the share price of a company increases and becomes relatively high-priced, the company either goes for a stock split or a bonus offering. In case of TCS, the face value is Re 1 which is the minimum denomination for the face value of a share allowed by law, it had to go for a bonus offering.
The software maker also announced a dividend of Rs 29 per share.
On Friday, TCS shares jumped 6 percent at Rs 3,378, giving it a market capitalisation of Rs 6.7 lakh crore.