Bonus shares are additional shares issued by a company to its existing shareholders at no extra cost, typically funded from the company's retained earnings or reserves. They are distributed proportionally based on existing shareholdings.
For example, if a company declares a 2:1 bonus, each shareholder receives 1 additional share for every 2 shares they already own. If you held 100 shares, you would receive 50 bonus shares, bringing your total to 150.
While bonus shares increase the number of shares outstanding (which may temporarily reduce the per-share price), they increase shareholders' total stake in the company. Bonus issues are generally seen as a positive sign, indicating the company's confidence in its financial health and future growth. They also improve stock liquidity by making shares more affordable for retail investors.