Reliance Industries Ltd., a diversified conglomerate led by Mukesh Ambani, has set the record date for its 1:1 bonus share issue. The company has informed stock exchanges that the record date for determining the equity shareholders eligible for the bonus equity shares will be Monday, October 28, 2024. This announcement comes after the company received shareholder approval for both the bonus share issue and the increase in its authorized share capital through an e-voting process on October 16, 2024.
The bonus issue of shares was initially announced by Mukesh Ambani during the 28th annual general meeting (AGM). The resolution for the bonus share issue received overwhelming support, with 99.92% of the votes cast in favor and only 0.07% against it. Similarly, the resolution for increasing the authorized share capital and amending the Capital Clause of the Memorandum of Association garnered 98.96% votes in favor, while 1.04% were against it.
This is the sixth instance of Reliance Industries issuing bonus shares to its shareholders. The company has a history of issuing bonus shares in various ratios, including 3:5 in 1980, 6:10 in 1983, and 1:1 in 1997, 2009, and 2017. The most recent three bonus issues have all been in the ratio of 1:1.
Reliance Industries will issue bonus shares out of the securities premium account received in cash and/or general reserve and/or retained earnings available as of March 31, 2024. The corporate action will result in the company's authorized share capital increasing from Rs 15,000 crore to Rs 50,000 crore.
The bonus share issue is significant for investors as it makes the stock more accessible to retail investors. With a larger number of shares available in the market, a wider range of investors can access and trade the stock more easily. This is particularly beneficial when the share price has significantly increased.
As of June 30, Reliance Industries had a total of 33.7 lakh small retail shareholders, those with an authorized share capital of less than 2 lakh. The shares of Reliance Industries ended 0.8% higher on Wednesday at 2,709.4. The stock has corrected over 15% from its peak, bringing its 2024 gains down to 4.6%.
Why Reliance Industries Issues Bonus Shares
Reliance Industries issues bonus shares primarily to reward its shareholders and make the stock more accessible to retail investors. The company's strategy is to create wealth for India and enhance the quality of life of every Indian, as emphasized by Mukesh Ambani during the AGM.
By issuing bonus shares, Reliance Industries aims to improve stock liquidity. This means that more investors can buy and sell the stock, leading to increased market activity and potentially higher stock prices over time.
The company's decision to issue bonus shares also reflects its commitment to its shareholders. By increasing the number of shares outstanding, Reliance Industries ensures that all existing shareholders receive additional shares at no cost, effectively doubling their holdings.
However, it's important to note that while the number of shares held by each shareholder will double, the total value of their investment will remain unchanged. This is because the share price will be adjusted proportionately to reflect the increased number of outstanding shares.
Impact on Shareholders
For shareholders, the bonus share issue is a positive development. It means that investors who hold shares of Reliance Industries in their demat accounts before October 28, 2024, will be eligible for the bonus issue of shares.
If an investor currently owns 1,000 RIL shares, their holding will increase to 2,000 shares after the bonus issue. This increase in shareholding can potentially lead to higher dividends and better long-term returns for investors.
However, it's crucial to understand that the value of the investment remains unchanged. The share price adjustment ensures that the overall value of the portfolio does not change, but the number of shares increases.
Historical Context of Bonus Issues by Reliance Industries
Reliance Industries has a long history of issuing bonus shares to its shareholders. The first bonus issue was in 1980 at a ratio of 3:5, followed by a 6:10 bonus issue in 1983. The most recent three bonus issues have all been in the ratio of 1:1.
The 1997 bonus issue was also declared in the 1:1 ratio. In 2009, Reliance Industries announced another 1:1 bonus issue, with the stock turning ex-date on November 26 that year. The last bonus issue was in 2017, again in the 1:1 ratio.
Besides bonus issues, Reliance Industries has also announced five rights issues, the last one in May 2020. The company's strategic decisions, including demerging Jio Financial Services Ltd in July 2023, reflect its commitment to expanding its business operations and rewarding its shareholders.
Conclusion
In conclusion, the announcement of the record date for the 1:1 bonus share issue by Reliance Industries is a significant development for its shareholders and the broader market. The company's commitment to rewarding its shareholders and improving stock liquidity is evident in its decision to issue bonus shares.
As investors look forward to the October 28 record date, they should understand the implications of the bonus share issue and how it affects their investments. By doubling their shareholdings without changing the overall value of their portfolios, Reliance Industries aims to enhance the wealth creation potential for its shareholders.
