Life Insurance Corporation of India shares seemed to crash by 50% in one trading session, but the fall was only a technical adjustment after its first ever bonus issue. The company announced a one for one bonus, giving investors one free share for every share held. The record date was 29 May and more than 21 lakh shareholders qualified.
On Wednesday the stock closed at ₹830. On Friday it opened at ₹417.60, which looked like a 50% drop. In reality the effective decline was only about 1.5%, with shares trading near ₹411.45. The market capitalisation remained unchanged because bonus shares are issued from reserves. LIC used ₹6,325 crore from its surplus of nearly ₹1.5 lakh crore to fund the issue.
Bonus shares increase liquidity and make the stock more affordable for retail investors. They are also seen as a sign of strong financial health. Only investors who held shares in their demat accounts on the record date were eligible. Due to the T plus one settlement cycle, the last day to buy was 27 May, since markets were closed on 28 May for Bakri Id.
Since listing in May 2022, LIC has declared five interim dividends. This bonus issue marks its first major corporate action of this kind, showing confidence in its reserves and commitment to rewarding shareholders.