Reliance Industries Ltd (RIL) announced on Thursday that its board has approved a bonus share issue in a 1:1 ratio. This marks the sixth such bonus issue by the leading firm on Dalal Street. The Mukesh Ambani-led company has stated that the record date for the bonus issue will be communicated at a later time. Following the announcement, RIL’s shares were trading 1.54% lower at ₹2,983.10.
Bonus shares are issued only to existing shareholders, which increases the total number of outstanding equity shares but reduces the company’s free reserves and surplus. This corporate action generally leads to a decrease in per-share ratios such as Earnings Per Share (EPS) and book value per share, resulting in a proportional reduction in share price.
In a filing to stock exchanges, Reliance Industries stated: “The board of directors has recommended to the shareholders, for their approval via postal ballot, the issuance of bonus shares in the ratio of 1:1, i.e., one new fully paid-up equity share of ₹10 each for every one existing fully paid-up equity share of ₹10 each, to eligible equity shareholders of the company as of the record date. This will be done by capitalizing securities premium received in cash and/or general reserve and/or retained earnings.”
The bonus shares will be issued from the securities premium account, general reserve, or retained earnings available as of March 31, 2024.
RIL’s last bonus issue occurred in 2017, with the stock price surging 318% since then, rising from ₹725.65 on September 7, 2017, to ₹3,015 on Wednesday. This was also a 1:1 bonus issue. A similar bonus ratio was offered in 2009, with the stock turning ex-date on November 26 of that year. The company’s earlier bonus issues were in 1997 (1:1 ratio), 1983 (6:10 ratio), and 1980 (3:5 ratio). RIL has also issued five rights issues, the latest being in May 2020.
In addition, the RIL board sought shareholder approval to increase the company’s authorized share capital from ₹15,000 crore to ₹50,000 crore. The board also approved the forfeiture of partly paid-up equity shares where call money, either the first or second and final call, remains unpaid. If the call money is not paid by September 20, 2024, the forfeiture will take effect.
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