Companies frequently release bonus shares, even if they do not face a scarcity of liquid funds. Once the bonus shares are issued the company’s share capital goes up however amount available to the company under reserve goes down according to the amount of the issued bonus shares. This strategy is called the capitalization of reserves. The reason most of the companies release these bonus shares is to try to encourage more retail participation in equities. It is hard for retail investors to invest in a company when its price per share is too high. Releasing bonus shares reduces the price per share of the same stock. A retail investor can easily enter the market at a lower rate that way.