Northspread
Formula sheet/NISM Series XV: Research Analyst/Corporate Actions
[ CORPORATE ACTIONS ]

Bonus Issue, Stock Split & Share Consolidation Formulas

Bonus(Ratio A:B):Ex-Bonus Price=Pcum×[B/(A+B)]∣Post-Bonus Shares=Nold×[(A+B)/B]Bonus (\text{Ratio A}:B): \text{Ex-Bonus Price} = P_{\text{cum}} \times [ B / (A + B) ]\quad\Big|\quad \text{Post-Bonus Shares} = N_{\text{old}} \times [ (A + B) / B ]
Stock Split:Post-Split Price=Ppre×(FVnew/FVold)∣Post-Split Shares=Npre×(FVold/FVnew)\text{Stock Split}: \text{Post-Split Price} = P_{\text{pre}} \times (FV_{\text{new}} / FV_{\text{old}})\quad\Big|\quad \text{Post-Split Shares} = N_{\text{pre}} \times (FV_{\text{old}} / FV_{\text{new}})
Consolidation:Post-Consolidation Price=Ppre×(FVnew/FVold)∣Post Shares=Npre×(FVold/FVnew)Consolidation: \text{Post-Consolidation Price} = P_{\text{pre}} \times (FV_{\text{new}} / FV_{\text{old}})\quad\Big|\quad \text{Post Shares} = N_{\text{pre}} \times (FV_{\text{old}} / FV_{\text{new}})
Variables

Corporate actions are accounting/structural adjustments; total economic wealth of the holding remains invariant initially. PcumP_{\text{cum}}: Cum-rights/cum-bonus market price; NoldN_{\text{old}}, NpreN_{\text{pre}}: Shares held before the action; A:B: Bonus ratio (A new shares for every B held); PpreP_{\text{pre}}: Price before split/consolidation; FVoldFV_{\text{old}}, FVnewFV_{\text{new}}: Face value before and after split/consolidation.

Worked examples
Rights Issue: TERP and Value of Right Entitlement

An investor holds 200 shares of Reliance Power trading at a cum-rights price of Rs 150. The company announces a 1-for-4 rights issue at a subscription price of Rs 100 per share. Calculate the Theoretical Ex-Rights Price (TERP) and the Value of Right Entitlement.

Bonus Issue, Stock Split & Share Consolidation Adjustments

An investor holds 600 shares of TCS with Face Value Rs 10 trading at Rs 3,600. Calculate post-action share count, face value, and theoretical price for: (a) 1:1 Bonus Issue, (b) 1:5 Stock Split, (c) 5:1 Share Consolidation.