In a Diwali gift for its shareholders, the Reliance Industries (RIL) board today recommended one bonus share for every share held and a dividend of Rs 13 a share.
The last time India’s largest private sector company gave bonus shares to its shareholders was 12 years ago. This year, 39 companies have announced bonus shares so far. Before RIL, state-owned Indian Oil Corporation had announced a 1:1 bonus issue last month.
The dividend will result in a payment of Rs 2,219 crore, inclusive of taxes of Rs 322 crore. Both the bonus shares and dividend will accrue to the shareholders of Reliance Petroleum (RPL), which has been amalgamated recently with the company. RIL has issued its shares to the RPL shareholders on Monday.
Reliance shares fell 1.57 per cent to Rs 2,099 on the Bombay Stock Exchange, declining for the fourth straight day. The free-share announcement was made after the stock markets closed.
“The proposal for bonus and dividend continues Reliance’s tradition of rewarding shareholders on a sustained basis,” a company statement said.
Since its listing in 1978, the total returns to RIL shareholders are 25 per cent compounded. Since the demerger, RIL has created value of Rs 2,47,000 crore in market capitalisation and shareholders have earned 40 per cent compounded return, the statement added.
RIL had raised Rs 3,190 crore last month, selling treasury stock at an average of Rs 2,125 apiece. The company had created the treasury stocks in 2002, when it merged Reliance Petroleum. The company has almost 200 million such shares.
Chirayush Bakshi, vice-president, Emkay, said, “After the bonus share issue, servicing equity will be difficult. From next year onwards, RIL’s future cash outflow will be higher because of the enhanced equity base. However, the bonus and dividend will excite investors, especially during the financial crisis, and the share price is expected to rise 20 to 25 per cent in a short period.”
Amitabh Chakraborty, president, Religare Securities, told Bloomberg that the management may be trying to neutralise the negative perception that came from the recent sale of treasury stocks. The sale gave out the perception that the current share prices have reached a cap.
Others said the move might have been prompted by the ongoing war between the two Ambani brothers and Mukesh Ambani may be trying to win the confidence of RIL’s three million shareholders.
The company also released restated results for 2008-09 to reflect the absorption of RPL effective from April 1, 2008.
Corresponding period figures have been restated, wherever necessary, but the numbers are not comparable because of the absorption of Reliance Petroleum in the year, the company said.
The consolidated net profit stood at Rs 15,296 crore for the year ended March 31, 2009, while total income was Rs 153,138 crore. The company had registered a net profit of Rs 15,324 crore (from ordinary activities) in the FY08, the company stated in a filing to the Bombay Stock Exchange.
On a standalone basis, RIL's audited net profit stood at Rs 15,637 crore for 2008-09 against Rs 15,261 crore in the previous year. The company's standalone net turnover was Rs 143,907 crore in the last fiscal, while it was Rs 134,338 crore in 2007-08. The comapny has spent Rs 102,288 crore towards buying raw materials including crude. Thus, the expenditure stood at Rs 123,359 crore.
The company said that it has recognised Rs 370 crore towards liabilities on account of corporate guarantee issues on behalf of a subsidiary, being an exceptional item. In the previous year, exceptional item of Rs 4,733 crore represent gains primarily arising out of transactions concerning Reliance Petroleum shares.