Reliance Industries Limited (RIL), under the leadership of Mukesh Ambani, has recently made headlines with its announcement of a bonus shares issuance in a 1:1 ratio. This means that shareholders will receive one additional share for each share they currently possess. The resolution was confirmed via e-voting, with the record date for this pivotal event set for October 28, 2024. This strategic move reflects RIL’s commitment to rewarding its shareholders while also enhancing its market presence.
Understanding the Bonus Issue
The decision to issue bonus shares comes after a thorough evaluation by the board during its 47th Annual General Meeting held in August 2024. This will mark a significant milestone for Reliance, as this will be the sixth time the company has issued bonus shares, with previous instances occurring in 1980, 1983, 1997, 2009, and 2017. In addition, RIL has increased its authorized share capital from ₹15,000 crore to ₹50,000 crore, which underscores its robust growth strategy aimed at maximizing shareholder value. A regulatory filing on October 16 confirmed the record date for eligible shareholders for the bonus shares.
Financial Considerations of the Bonus Share Issuance
This bonus share issuance will be financed through various reserves, including the company’s securities premium account and retained earnings. Following this corporate action, RIL’s paid-up capital is expected to double from ₹6,766.23 crore to approximately ₹13,532.46 crore, resulting in a total of 1,353.24 crore equity shares. The company estimates that around ₹6,766.23 crore will be allocated for this initiative, which is based on the paid-up capital as of the record date. This development is anticipated to enhance liquidity and attract more retail investors to Reliance shares.
Recent Performance Insights and Future Prospects
In its latest disclosure for Q2 FY25, Reliance reported a 3.6% year-on-year decline in consolidated net profit, totaling ₹19,101 crore compared to ₹19,820 crore in the previous year. However, it showed a sequential increase of 9.5% from the Q1 FY25 profit of ₹17,448 crore. The company’s revenue registered a marginal rise of 0.8%, reaching ₹2,58,027 crore. Mukesh Ambani reiterated during the AGM the company’s dedication to generating wealth for India and boosting the quality of life for its citizens, with the bonus share issuance reinforcing its commitment to providing value to shareholders.
Conclusion
The upcoming bonus share issuance by Reliance Industries on October 28, 2024, signifies a strategic opportunity for shareholders to enhance their equity positions. This initiative not only demonstrates Reliance’s trajectory of strong growth but also emphasizes its promise to deliver shareholder value. Disclaimer: This article serves informational purposes only and does not constitute financial advice. Investors should undertake their due diligence or consult with financial advisors before making investment decisions.
FAQs
What is a bonus share?
A bonus share is a free additional share given to existing shareholders, typically issued out of company profits or reserves.
How does the bonus share affect the stock price?
While the total value of the investor’s holdings does not change, the per-share value may decrease temporarily due to an increase in the number of shares outstanding.
What is the significance of the record date?
The record date is crucial as it determines the shareholders eligible to receive the bonus shares.
Will I still benefit from the bonus shares if I sell my shares before the record date?
No, only shareholders on record as of the record date will be entitled to receive the bonus shares.