Reliance Industries Limited (RIL) on Thursday approved the issuance of bonus shares in a 1:1 ratio for its shareholders.
The announcement was made following the company’s annual general meeting (AGM), where chairman Mukesh Ambani, had hinted at this move as a way to reward investors.
The bonus shares will be allocated at a later date, with the record date yet to be announced.
According to RIL’s regulatory filing, the bonus shares will be issued from the company’s securities premium account, general reserves, or retained earnings available as of March 31, 2024.
The decision will also increase RIL’s authorised share capital from Rs 15,000 crore to Rs 50,000 crore. The exact number of bonus shares will be based on the fully paid-up equity shares as of the record date.
Following the announcement, RIL’s share price fell by 1.3%, closing at Rs 2,989 on the Bombay Stock Exchange (BSE). The stock has shown flat returns over the last six months, underperforming compared to broader market trends.
During RIL’s AGM on August 28, Ambani spoke about the company’s commitment to rewarding its shareholders. He highlighted RIL’s role in generating wealth and improving the quality of life for Indians, stating that growth in the company translates to rewards for investors.
"We are in the business of creating wealth for India and enhancing the quality of life of every Indian, every single day," Ambani said, highlighting RIL's long-term commitment to its shareholders.
What does the bonus share issue mean?
A 1:1 bonus share issue means that RIL’s 35 lakh shareholders will receive one additional share for each share they currently hold. For instance, if a shareholder owns 1,000 shares, they will receive 1,000 additional shares, effectively doubling their holding to 2,000 shares.
However, while the number of shares increases, the overall value of the investment remains unchanged, as the share price gets adjusted after the bonus issue. This action is typically aimed at improving the stock's liquidity, making it accessible to a broader base of investors.
This is not the first time RIL has offered bonus shares to its shareholders. The company has a history of rewarding investors through bonus share issues, having done so five times before. RIL's first bonus issue was in 1980, with a 3:5 ratio, followed by a 6:10 issue in 1983. More recent bonus issues were in 1997, 2009, and 2017, all in the 1:1 ratio.
Source: India Today