While investors await the listing of Reliance Jio and Reliance Retail, Mukesh Ambani stated on Thursday that the company will consider distributing bonus shares at a 1:1 ratio a week later on September 5. The bounty was enough to send the Nifty stock up 1.5% on AGM day.
RIL is not only India's most valued listed firm, worth Rs 20.6 lakh crore, but it also reported the highest annual profit of Rs 79,020 crore in FY24. While announcing the bonus share issue, Ambani stated that they are not in the business of chasing short-term profits and hoarding money.
"We are in the business of creating wealth for India and improving the quality of life of every Indian, every day," Ambani stated at the AGM, adding that as Reliance grows, shareholders benefit handsomely.
RIL Bonus Issue
RIL has previously issued bonus shares five times, commencing with a 3:5 bonus issuance in 1980 and 6:10 in 1983. The past three bonus editions, in 1997, 2009, and 2017, have a ratio of 1:1.
A bonus issue involves the issuance of free shares to existing owners as of the record date in order to capitalize reserves. However, bonus issues lead to no change in investment value as share prices get adjusted accordingly.
"By offering a 1:1 bonus, not only do a wider base of investors get access to the stock but it also offers more liquidity in the RIL shares," said Amit Goel, Co-Founder & Chief Global Strategist, Pace 360. The stock has gained almost 26% in the last 1 year and 17% so far in the year.
In RIL's case, if approved at the board meeting, shareholders will receive one free share for each existing share. For example, if you own 100 RIL shares, you will eventually own 200 shares. However, bonus concerns do not affect investment value because share prices are changed properly.
"By offering a 1:1 bonus, not only do a broader base of investors gain access to the stock, but it also increases liquidity in RIL shares," said Amit Goel, Co-Founder & Chief Global Strategist at Pace 360. The stock has increased over 26% in the last year and 17% so far this year.
"Reliance, as a conglomerate, has continually rewarded its shareholders by providing these incentive possibilities because they believe in the long-term growth and value of both investors and the company's success. The bonus share issue demonstrates the company's financial health and commitment to providing value to shareholders. Goyal believes that enhanced liquidity and the possibility for future value appreciation will outweigh any negative impact on the share price.
During the AGM, Ambani also stated that Jio and Retail are likely to treble their revenues and EBITDA over the next three to four years.
"Our New Energy business will be Reliance's crowning achievement. I see it becoming as large and successful in the next 5-7 years as our O2C business, which we had created over the previous 40 years. And I am certain that green fuels and AI-based solutions will drive Reliance's long-term growth," he said.
Overall, he stated that Reliance Group is on course to more than double its size by the end of this decade and continue to develop rapidly in the coming decades.
