RIL to issue bonus shares, ratio 1:1

7 Oct 2009, 2000 hrs IST, PTI

Investors' darling Reliance Industries today announced issue of bonus shares after a 12 year-hiatus, a move that analysts expect would flare up the markets on the eve of Diwali.

The company founded by Dhirubhai Ambani, credited for drawing retail investors to stock markets in the 1970s, recommended an issue of one bonus share for every share held by shareholders and would help unlock value.

The shares fell 1.57 per cent to Rs 2,099 on the Bombay Stock Exchange, but is expected to jump after the unscheduled announcement.

The board has also approved a dividend of Rs 13 per fully paid-up equity share of Rs 10 of the company to the shareholders, Reliance Industries CFO Alok Agarwal said.

Analysts said that the surprise announcement of a bonus issue by RIL, will definitely act as trigger for the market tomorrow.

"This comes as a big surprise to the shareholders of Reliance Industries and would propel investor sentiment. The scrip, which has been under-performing for the past few days, is likely to open strong. It is a move by RIL to win back ivestor confidence," SMC Global Vice President Rajesh Jain said.

The last time Reliance Industries announced a bonus issue was in October 1997.

"Both the bonus shares and dividend will accrue to the shareholders of RPL," RIL CFO Agarwal said.

Geojit BNP Paribas Financial Services Research Head Alex Mathew said, "The company had last announced a bonus issue way back in 1997, so this is good move in the interest of investors. However, after an initial surge some profit booking may come into the stock later in the day."

The bonus issue could help regain flagging investor confidence in the scrip.

RIL scrip has been on a downslide since October one and has plunged over four per cent to Rs 2,099 today from Rs 2,201 on September 30.

Reliance Power, part of the other Reliance group led by Anil Ambani, had announced a 3:5 bonus issue in February 2008 after its disappointing debut at the bourses.

"The proposal for bonus and dividend continue RIL's tradition of awarding shareholders on a sustained basis. If we look at our track record since we listed in 1978, our shareholders have got 25 per cent compounded return over these 31 years since it became a public company," Agarwal said.

"The announcement can act as a trigger point for the stock (RIL) which was mired in controversy. RIL management is convinced that it can serve the investor interest and so it is thinking about increasing the equity share capital. It can hold up the momentum and the counter can outperform the Sensex in the coming days," Unicon Financial CEO G Nagpal said.


via: E.T