Definition:

In the Indian stock market, a corporate action (CA) is an event initiated by a company that brings about a material change to its securities, impacting shareholders and potentially affecting stock prices. These actions can be mandatory (like bonus issues) or voluntary (like rights issues), and can be either monetary (like dividends) or non-monetary (like stock splits). A corporate action is an event or activity undertaken by a company that has a direct impact on the value of its securities (shares or bonds) held by its investors.

Initiation: These actions are typically initiated by the company's board of directors and require shareholder approval in some cases

Impact: Corporate actions can lead to changes in the number of shares held by investors, the value of those shares, or the amount of cash received as dividends or interest.

Mandatory vs. Voluntary:

Mandatory: These actions are automatically applied to all shareholders, such as bonus issues and stock splits.

Voluntary: These actions require shareholders to take action, such as rights issues.

Types of Corporate Actions:

Monetary:

Dividends: A portion of a company's profits distributed to shareholders.

Interest Payments: Payments made to bondholders.

Non-Monetary:

Bonus Issue: Dividing existing shares into multiple shares, potentially increasing liquidity.

Stock Split: Offering new shares to existing shareholders at a discounted price.

Rights Issue: Issuing additional shares to existing shareholders, typically from company reserves.

Buyback: A company repurchases its own shares from the market.

Mergers and Acquisitions: Combining or acquiring other companies.

Spin-offs: Separating a subsidiary or business unit into a new, independent company.

Carve-outs: Selling a portion of a subsidiary or business unit to the public or a private investor.