Let’s explore the concept of bonus issue and Reliance’s history of offering them.
What is a Bonus Issue of Shares?
A stock dividend and bonus issue, is a type of corporate action in which a company gives its shareholders free additional shares based on the number of shares they already own. Investors have noticed Reliance Industries’ recent announcement of a bonus issue in 2024 as a significant development.
Why Do Companies Issue Bonus Shares?
The key reasons behind a bonus issue are:
Reward for Shareholders: A bonus issue gives shareholders more shares without additional investment.
Improving Liquidity: With bonus issue of shares a company increases the liquidity of its stock and make it more appealing to investors.
Demonstrating Confidence: Bonus share issue shows that it is confident in its ability to maintain or grow its value and its future performance.
Psychological Advantage: Even though the value of each share decreases, investors may experience that now they own more shares.
Reliance Industries’ 2024 Bonus Issue: A 1:1 Ratio
Dragged down by four years of its investment cycle, Reliance Industries announced the bonus issue in September 2024, that the shareholders get one more share free for every held by them. The date for the bonus record is October 28, 2024 and will be quoted ex-bonus on said day. It’s another step to prove Reliance commitment towards adding value to the shareholder.
This 1:1 ratio has been consistent throughout the history of Reliance which also indicates that it treats long term shareholders well. The ex-bonus date is the day when the additional share will be reflected in Share price of Reliance which has an adjusted Price from October 28, 2024. This ex-bonus date is very important for shareholders because, after this date, After the record date, the stock will trade without the right of the investors to receive the bonus shares.
A Look Back: Reliance Industries Bonus History
Reliance Industries is known for a good history of issuing bonus shares given the stable growth and sound financials.
Listed below are a few instances from the past:
| Announcement Date | Bonus Ratio | Record Date | Ex Bonus Date |
|---|---|---|---|
| 05-09-2024 | 1:1 | 28-10-2024 | 28-10-2024 |
| 21-07-2017 | 1:1 | 09-09-2017 | 07-09-2017 |
| 07-10-2009 | 1:1 | 27-11-2009 | 26-11-2009 |
| 13-09-1997 | 1:1 | 29-11-1997 | 27-11-1997 |
| 28-10-1983 | 3:5 | – | – |
Effect of Bonus Issue on Share Prices
The stock price usually adjusts after a bonus issue (to reflect the increase in share count). For instance, if a company declares bonus issue of 1:1 then the number of shares get doubled and price will be reduce to half(theoretically), in case there is no other reasons like market factors influencing on it. The price adjustment was designed to make certain the total value of a shareholder’s investment remains constant.
All said, with the bonus shares post October 28, 2024 Reliance investors can expect to see share price go down as had earlier accounted for, however no impact on overall market value of a holder is seen. Let us take an example :If your share price was ₹ 2500 before bonus issue (i.e. the date up to which they are taking in account), after bonus it will be comfortable to be around approximately ₹1,250 per share after the 1:1 bonus, with twice the number of shares held.
Significance for Shareholders with Bonus Share issue :
The 2024 bonus issue will prove to be an advantageous provision for Reliance Industries long-term investors in many ways.
Improved Shareholding : The shareholders will now own a part of the merged entity, which should bode well for dividends in case Reliance decides to heighten its dividend policies.
Higher Liquidity: It is easier to buy and sell Reliance share for retail investors as well institutional investors now more shares are tradable.
In my view, Reliance is much more confident of the growth ahead: The special bonus issue signals that it believes its own story and ability to provide earnings visibility into future years will only continue.
Conclusion
Reliance has a moving history of issuing bonus shares. There have been multiple bonuses like the last 1:1 in 2004 to celebrate company’s silver jubilee year and here is latest such good news.
In summary, Reliance Industries bonus issues are an example of the vision that company carry, reward to those who invested and keep on creating value for long term. The investors who stay invested in the company can expect more such corporate actions when Reliance keeps reaching new benchmarks.
