Billionaire Mukesh Ambani-led Reliance Industries Limited, at its 47th annual general meeting (AGM) held on Thursday, August 29, announced that its board of directors will meet on September 5 to decide about the bonus issues. Ambani announced that the company is considering a bonus issue at a ratio of 1:1. The company will disclose the additional details in the coming days.
RIL is the India’s most valuable listed company at Rs 20.6 lakh crore. The company reported the highest annual profit of Rs 79,020 crore in FY24.
“Reliance Industries Limited has sent a notice to the stock exchanges that the Board of Directors will meet on September 5 to consider issuing bonus shares in the ratio of 1:1,” said Ambani at the meeting.
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This means Reliance Industries’ shareholders will receive one bonus share for every share they hold for a specific period of time.
Ambani added that they are not in the business of pursuing short-term profit and hoarding wealth. "We are in the business of creating wealth for India and enhancing the quality of life of every Indian, every single day," Ambani announced at the AGM, adding that when Reliance grows, shareholders are rewarded handsomely.
The stock price surged sharply after the company announced plans to issue bonus shares. On Thursday, the stock rose around 2 per cent to Rs 3,050 after the announcement of the bonus issue.
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Meanwhile, it has surged over 38 per cent from its 52-week low of Rs 2,221, hit in October 2023. The stock has gained almost 24 per cent in the last 1 year and 19 per cent in 2024 year-to-date (YTD).
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Here’s what the RIL bonus issue means for investors:
Under a bonus issue, existing shareholders as on the record date are issued free shares by way of capitalization of reserves. The bonus issue, if approved in the board meeting on September 5, is expected to not only boost investor confidence but also improve the stock’s liquidity, making it more accessible to a wider base of investors. Shareholders will get one free share against every existing share. For example, if you own 100 RIL shares, you will own 200 shares after the bonus issue.
While a bonus issue increases the number of shares in circulation, it does not increase the company’s market capitalization. After a bonus issue, the share price usually adjusts downwards to reflect the increased number of shares, but the overall market capitalization remains the same.
Amit Goel, co-founder and chief global strategist at Pace 360 says Reliance as a conglomerate has consistently rewarded its shareholders by offering these bonus opportunities as they believe in long-term growth and value of both the investors and the company to achieve success.
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“Mukesh Ambani explains how it is imperative for shareholders to derive meaningful value in order to guarantee perpetual success of the firm. The announcement of a bonus share issue by Reliance Industries Ltd (RIL) has been positively received by the market. It is a sign of the company's financial strength and its commitment to returning value to shareholders. The increased liquidity and potential for future value appreciation are likely to outweigh any negative impact on the share price,” Goel said.
In the past, RIL has consistently rewarded its shareholders with bonus shares, with previous issues in 1980, 1983, 1997, 2009, and 2017. The oil-to-telecom conglomerate announced its first bonus issued in 1980 with a ratio of 3:5. Meanwhile, in 1983, RIL announced a bonus of 6:10. The last three bonus issues in 1997, 2009 and 2017 have been in the ratio of 1:1.
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