Bonus Debentures: A Shareholder's Bounty

Abstract

Bonus debentures are unheard even in countries that have a robust capital market system. The concept of bonus debenture is still evolving and is yet to gain ground among Indian Companies. Value conscious companies often extend out of the way returns to shareholders. Organisations with large reserves and confident of earning positive free cash flows in the future can create a win-win situation for both the shareholders and the company by rewarding the members with bonus debentures, simultaneously restructuring its reserves to improve the leverage, and enhancing investor confidence without a significant impact on the cash which can continue to be deployed in the business.