Reliance share price

Reliance Industries Announces Bonus Shares: What This Means for Investors

Reliance Industries Ltd (RIL), India’s most valuable listed company with a market capitalization of Rs 20.6 lakh crore, has recently announced a significant development. Mukesh Ambani, the conglomerate’s chairman and managing director, revealed that RIL is considering issuing bonus shares in a 1:1 ratio. This announcement comes as the company reported its highest annual profit ever of Rs 79,020 crore for the fiscal year 2024 (FY24). The news has positively impacted RIL’s stock, which ended 1.5% higher on the day of the Annual General Meeting (AGM).

Key Details of the Bonus Share Issue

Bonus Share Ratio and Historical Context:

Bonus Ratio: If approved in the upcoming board meeting, RIL will issue one free share for every existing share held by shareholders, effectively doubling the number of shares in circulation.
Historical Bonus Issues: RIL has issued bonus shares five times in the past:
- 3:5 ratio in 1980
- 6:10 ratio in 1983
- 1:1 ratio in 1997, 2009, and 2017

Bonus shares are distributed to existing shareholders by capitalizing reserves, meaning no new cash investment is required.

Impact on Shareholders:

For example, if an investor holds 100 shares of RIL, they will receive an additional 100 shares, totaling 200 shares post-bonus. It’s important to note that while the number of shares increases, the overall investment value remains unchanged as share prices adjust accordingly.

Market Reaction and Expert Opinions:

Stock Performance: RIL’s stock has gained nearly 26% over the past year and 17% so far this year.
Liquidity and Access: Amit Goel, Co-Founder & Chief Global Strategist at Pace 360, explains that the bonus issue will enhance liquidity and provide a wider base of investors with access to RIL shares. He believes that this move reflects the company’s strong financial health and commitment to shareholder value.

Mukesh Ambani’s AGM Highlights

During the AGM, Mukesh Ambani emphasized that Reliance is not focused on short-term profits but is committed to creating long-term wealth for India. He assured shareholders that the growth of Reliance will lead to substantial rewards for investors.

Future Plans:

Jio and Retail: Ambani announced that Reliance Jio and Reliance Retail are expected to double their revenues and EBITDA within the next 3-4 years.
New Energy Business: Ambani highlighted the New Energy business as a future growth engine, predicting it will become as significant and profitable as the O2C (Oil to Chemicals) segment over the next 5-7 years. He also mentioned that green fuels and AI-based solutions will drive long-term growth.

Conclusion:

Reliance Industries’ planned bonus share issue is a strong indicator of its financial strength and commitment to returning value to shareholders. The move is expected to improve liquidity and broaden investor access, while the company’s future plans signal continued growth and innovation. As RIL continues to expand its business and explore new opportunities, its shareholders can look forward to potential long-term gains and enhanced value.

FAQs:

1.What is the proposed bonus share ratio for Reliance Industries?

A. Reliance Industries plans to issue bonus shares in a 1:1 ratio, meaning shareholders will receive one additional share for each existing share.

2.What is the historical context of Reliance’s bonus shares?

A. Reliance has issued bonus shares five times, with the most recent being in 2017, all in a 1:1 ratio.

3.How will the bonus share issue affect the share price?

A. The bonus issue will increase the number of shares in circulation, leading to an adjustment in the share price. However, the overall investment value remains the same.

4.What is the minimum shareholding requirement for the bonus issue?

A. There is no minimum shareholding requirement; all existing shareholders as of the record date are eligible.

5.How has Reliance Industries’ stock performed recently?

A. The stock has risen 26% in the past year and 17% year-to-date.

6.What are Mukesh Ambani’s comments on the company’s growth?

A. Ambani emphasized that Reliance is focused on long-term growth and wealth creation for India, with substantial rewards for shareholders.

7.What future developments were highlighted at the AGM?

A. Ambani mentioned that Reliance Jio and Reliance Retail are expected to double their revenues and EBITDA in the next 3-4 years. The New Energy business is also projected to become a major growth driver.