Reliance Industries Limited (RIL), India's largest private sector company, has announced a 1:1 bonus issue for its shareholders. This move is part of the company's strategy to enhance shareholder value and reward its investors. The bonus issue, which will be the largest ever in the Indian equity market, is expected to be credited or dispatched to eligible shareholders by November 1, 2024.
1. **Bonus Issue Details**
The Board of Directors of RIL approved the issue of bonus shares in the ratio of 1:1, meaning that every shareholder holding one fully paid-up equity share of Rs. 10 each on the record date will receive one fully paid-up equity share of Rs. 10 each. The record date for determining eligibility to get bonus shares will be announced separately.
This bonus issue is significant as it will increase the paid-up capital of the company from Rs 6,766.23 crore to Rs 13,532.46 crore, comprising 1,353.24 crore equity shares. The company estimates that Rs 6,766.23 crore will be required to implement the bonus issue, and the final amount will be based on the paid-up capital on the record date.
The bonus shares will be issued out of securities premium account received in cash and/or general reserve and/or retained earnings available as of March 31, 2024. This move aligns with Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR).
2. **Historical Context of Bonus Issues by RIL**
RIL has a history of issuing bonus shares to its shareholders. The company has previously declared bonus issues in 1980, 1983, 1997, 2009, and 2017. The last three bonus issues in 1997, 2009, and 2017 were in the ratio of 1:1.
For instance, in 2017, the bonus issue was announced on July 21 with a record date of September 9. In 2009, the issue was announced on October 7 with a record date of November 27. This pattern suggests that there is typically a 40-50 day gap between the announcement and record date.
The announcement of this latest bonus issue coincides with the upcoming festive season in India and is being referred to as an early Diwali gift to all esteemed shareholders.
3. **Impact on Shareholders and Market**
The 1:1 bonus issue means that RIL's 35 lakh shareholders will get one free share against every existing share. For example, if you own 1,000 RIL shares, you will end up owning 2,000 shares. However, bonus issues lead to no change in investment value as share prices get adjusted accordingly.
Bonus issues typically improve the liquidity of the stock as a wider base of investors get access to the counter. This increased liquidity and potential for future value appreciation are likely to outweigh any negative impact on the share price.
Amit Goel, Co-Founder & Chief Global Strategist at Pace 360, noted that Reliance as a conglomerate has consistently rewarded its shareholders by offering these bonus opportunities. The bonus share issue is a sign of the company's financial strength and its commitment to returning value to shareholders.
4. **Future Outlook**
Reliance Industries remains committed to its mission of creating all-round value for all its stakeholders. The company's activities span hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, advanced materials and composites, renewables (solar and hydrogen), retail and digital services.
As of today, Reliance is ranked 86th in Fortunes Global 500 list of 'Worlds Largest Companies' for 2024. The company stands 45th in the Forbes Global 2000 rankings of 'Worlds Largest Public Companies' for 2023, the highest among Indian companies.
Reliance has been recognized in Time's list of the 100 Most Influential Companies of 2024, marking the only Indian company to have achieved this honor twice. Additionally, it is featured among LinkedIns 'Top Companies 2023: The 25 Best Workplaces To Grow Your Career In India.'
The company's latest audited financials as of March 31, 2024, show a solid reserve base. The securities premium account holds Rs 99,802 crore, while the general reserve stands at Rs 2,56,549 crore, and retained earnings amount to Rs 1,03,213 crore.
In conclusion, the 1:1 bonus issue by Reliance Industries is a significant move aimed at enhancing shareholder value and rewarding its investors. This announcement aligns with the company's commitment to long-term growth and value creation.
