Pakistan Stock Exchange
What are bonus shares and right shares on PSX?
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Short answer
Bonus shares are extra shares a company gives existing shareholders free of charge, created by converting reserves into share capital — a 10% bonus gives one new share for every ten held. Right shares are new shares offered to existing shareholders, usually at a discount, to raise cash; you can subscribe, sell the right or let it lapse. Neither changes your share of the company by itself, and the share price adjusts on the entitlement date.
Bonus vs right shares
| Bonus shares | Right shares | |
|---|---|---|
| Do you pay? | No | Yes, at the right price |
| Purpose | Capitalise reserves, increase share count | Raise new capital |
| Company's cash | Unchanged | Increases |
| Your options | Receive automatically | Subscribe, sell the right (letter of rights) or let it lapse |
| Price effect | Price adjusts down by the bonus ratio | Price adjusts toward a blended level |
How the price adjusts
With a 20% bonus (one share for every five), a holder of 100 shares at Rs 120 gets 20 more shares. The theoretical price after entitlement is Rs 120 × 100 ÷ 120 shares = Rs 100. The total value — Rs 12,000 — is the same. For rights, if the share trades at Rs 120 and a 1-for-4 right is offered at Rs 80, the theoretical ex-right price is (4 × 120 + 80) ÷ 5 = Rs 112.
What to do when you get a right offer
- Read the company's announcement: ratio, price, use of proceeds and subscription dates.
- Decide whether you want to invest more in this business — rights often fund expansion or repair weak balance sheets.
- If yes, subscribe through your broker or the share registrar before the deadline.
- If no, consider selling the letter of rights while it trades, rather than letting it lapse worthless.
- Check that new shares arrive in your CDC account after allotment.
Entitlement and tax
- As with dividends, you must be on the register on the entitlement date; with T+1 settlement, buy at least one working day earlier and confirm with your broker.
- Fractional bonus entitlements are usually sold by the company and the proceeds paid to shareholders.
- Under current rules bonus shares are not taxed on receipt; capital gains tax applies when you sell, based on the adjusted cost.
- Right shares' cost is the subscription price you paid.
Reading the signal
A bonus issue often signals confidence and can improve liquidity by lowering the share price, but it creates no value on its own. A rights issue deserves more scrutiny: it may finance profitable growth, or it may mean the company needs cash to cover losses or debt. Read the use-of-proceeds section closely.
Roman Urdu mein jawab
Bonus shares aur right shares kya hain?
Bonus shares company maujooda shareholders ko muft deti hai — 10% bonus matlab har 10 par 1 naya share. Right shares naye shares hain jo maujooda shareholders ko aksar discount par paise jama karne ke liye pesh kiye jate hain; aap khareed sakte hain, right bech sakte hain ya chhor sakte hain. Entitlement par share price adjust hoti hai, kul qeemat wohi rehti hai.
Frequently asked questions
Do bonus shares make me richer?
Not by themselves. You hold more shares, but the price adjusts so your total value is unchanged on the entitlement date.
What is a letter of rights?
A tradable entitlement to subscribe to right shares. You can sell it on PSX during the trading window if you do not want to subscribe.
Are bonus and right shares Shariah-compliant?
They follow the status of the company. Shares of a Shariah-compliant company remain compliant; check the KMI All Share list.
When will bonus shares appear in my account?
After the book closure, the company credits them to your CDC account, typically within a few weeks.
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