On Thursday, Reliance Industries Ltd (RIL) announced that its board has approved a proposal to issue bonus shares in a 1:1 ratio, marking the company’s sixth bonus issue. The Mukesh Ambani-led firm stated that the record date for the issuance will be announced separately. Following this news, RIL shares were trading 1.54 percent lower at Rs 2,983.10.
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Bonus shares are issued exclusively to existing shareholders, reducing the company’s free reserves and surplus while increasing the number of outstanding equity shares. This corporate action typically results in a decline in per-share ratios such as earnings per share (EPS) and book value per share, causing the share price to drop proportionally to the number of bonus shares issued.
In a filing to the stock exchanges, Reliance Industries announced that its board of directors has recommended a 1:1 bonus share issue for shareholder approval via postal ballot. The proposal entails issuing one fully paid-up equity share of ₹10 for every one existing fully paid-up equity share of ₹10 to eligible shareholders as of the record date, by capitalizing securities premium, general reserves, or retained earnings.
Reliance Industries announced that the bonus shares will be issued from its securities premium account, general reserve, and/or retained earnings as of March 31, 2024.
The last bonus issue by RIL was in 2017, with the stock surging 318 percent since then, rising from ₹725.65 on September 7, 2017 (the ex-date for the 1:1 issue), to around ₹3,015 on Wednesday. The company had also announced a 1:1 bonus share ratio in 2009, with the stock turning ex-date on November 26 that year. In 1997, it declared a 1:1 bonus issue, while the 1983 bonus shares were offered in a 6:10 ratio, and the 1980 bonus in a 3:5 ratio. Additionally, RIL has conducted five rights issues, the most recent being in May 2020.
Meanwhile, the RIL board has also requested shareholder approval to increase the company’s authorized share capital from ₹15,000 crore to ₹50,000 crore.
Additionally, the board approved the forfeiture of partly paid-up equity shares for which call money—whether from the first call, second and final call, or both—remains unpaid. RIL stated that the forfeiture will be enforced if the call money is not paid by September 20, 2024.
