Sarah Brady
Updated on: October 8, 2024 5:56 am GMT
Billionaire Mukesh Ambani-led Reliance Industries Ltd (RIL) has announced a landmark bonus share issue, approved by its board on September 5, 2023. The board sanctioned a bonus share issuance in a 1:1 ratio, meaning each shareholder will receive an additional fully paid-up equity share for every share they currently own. This momentous resolution was revealed during RIL’s 47th annual general meeting, held late last month.
The announcement marks Reliance’s sixth bonus share issuance since its initial public offering (IPO) and comes as an early Diwali gift to its shareholders, coinciding with India’s festive season. It also reflects the company’s continued commitment to rewarding its equity holders during what it refers to as a “Golden Decade” of growth from 2017 to 2027.
Details of the Bonus Issue
The approved plan will see Reliance Industries increase its authorized share capital from ₹15,000 crore to ₹50,000 crore. The record date for the bonus shares will be communicated separately. According to their regulatory filing, the company emphasized solid backing for the issuance through capitalization of securities premium, general reserves, and retained earnings.
- The bonus shares will be issued in the ratio of 1:1, granting one new share for every existing share.
- RIL’s existing paid-up capital totals ₹6,766.23 crore, inclusive of 676.62 crore equity shares of ₹10 each.
- Post-issue, the paid-up capital is expected to double to ₹13,532.46 crore with an additional 676.62 crore shares.
This bonus issuance will require an estimated ₹6,766.23 crore, with the exact amount confirmed based on the paid-up capital on the record date.
Market Performance and Shareholder Implications
Reliance Industries has shown significant resilience, outperforming major Indian stock market indices including the Sensex and Nifty 50. Year-to-date (YTD), the share price for Reliance has increased by approximately 17%, contrasting with 16% for the Nifty 50 and 14% for the Sensex. Notably, the stock has fluctuated within a 52-week range, recently experiencing a high of ₹3,217.90, before settling at ₹2,987.15 after a slight decline.
Financial analysts are observing trends suggesting potential continued growth for Reliance Industries. In a technical note, JM Financial pointed out that significant selling activity in the stock has stabilized, with support levels identified around 0.1159-0.12 in recent years. They assert that this trend signals a lower likelihood of a breakdown in share value.
Company Performance Overview
During the April-June quarter of FY25, Reliance Industries reported a 4% decrease in consolidated profit after tax (PAT), totaling ₹17,448 crore compared to ₹18,182 crore the previous year. However, revenue witnessed an increase of 11.5%, resulting in ₹2,57,823 crore. This growth was attributed in part to strengthened contributions from core consumer and upstream business sectors, which helped balance weaker performances in the oil-to-chemicals (O2C) segments. Notably, Reliance’s telecom section, Jio Platforms, illustrated robust growth with an 11.6% rise in EBITDA, driven by significant revenue growth.
Future Growth Plans
Chairman Mukesh Ambani emphasized the company’s ambition to double its value over the next few years, aiming for significant advancements by 2027. This growth strategy includes launching a suite of artificial intelligence tools and enhancing its green energy production capabilities. The company’s commitment to leveraging innovative technologies and sustainable practices indicates its long-term vision for expansion and shareholder value enhancement.
Analysts largely agree that the strategic plans, alongside the bonus shares and robust market performance, position Reliance Industries favorably in the coming quarters, contributing positively to shareholder expectations.
Conclusion: What This Means for Shareholders
The company’s announcement of its largest-ever bonus share issue serves not only as an early festive gesture but also as a clear signal of its ongoing commitment to shareholder returns. With the approval for a 1:1 bonus share issue, existing shareholders can anticipate a significant increase in their equity holdings without any additional investment. This approach may further stimulate interest among potential retail investors, making Reliance’s shares more accessible in a lucrative framework designed to bolster long-term growth.
As Reliance gets ready to make these changes, shareholders and market experts will pay close attention to how the company performs in the future. They want to see how these changes will affect Reliance’s big plans in the bigger economy.
