Reliance Board To Consider Bonus Issue, Stock Zooms

The Reliance Industries scrip soared to a 52-week high on both the Bombay Stock Exchange and the National Stock Exchange yesterday, following an announcement that the companys board will meet to consider a bonus issue on June 26. The company is scheduled to hold its annual general meeting on the same day.

Reliance informed leading bourses nationwide that its board of directors will consider the issue of bonus shares on the companys equity capital.

The move lends credence to a statement made by RIL chairman Dhirubhai Ambani at the companys July 1997 AGM. Responding to a pointed query from a shareholder on whether a bonus could be expected in 1997, Dhirubhai had said, ``One will have no cause to complain at the next meeting.

 

The announcement triggered off frenzied trading at the markets, with RILs traded turnover touching Rs 689.28 crore (206.8 lakh shares) at the NSE and Rs 297.6 crore (89.70 lakh shares)at the BSE.

After opening at Rs 320 at the BSE, the stock touched a 52-week high of Rs 343 in intra-day trading, before closing marginally lower at Rs 340.50. The stock also touched a 52-week high of Rs 344 at the NSE before closing at Rs 341.90, a 5.61 per cent rise over the previous close of 323.75.

The cheer spread to the London market, with the Reliance GDR touching $23.25 at 18:00 IST, up 50 cents from Wednesdays level of $22.75.

The Reliance board will be considering rewarding its shareholders with a bonus issue after 14 years. In fact, Reliance has not made a domestic public issue since the late-1980s. Increases in its equity base have come only through successive GDR offerings.

Reliance Industries has issued bonus shares only twice in its entire history. The first issue was made in September 1980, at a 3:5 ratio. Reliance next offered six bonus shares for every 10 shares held in September 1983.

When the first bonus issue was announced, the companys share capital stood at Rs 12.36 crore and reserves at Rs 19.49 crore. On the second occasion, the share capital stood at Rs 41.95 crore and reserves at Rs 87.92 crore.

As on March 31, 1997, the RIL share capital stood at Rs 458.45 crore, while reserves amounted to Rs 8,012.49 crore. The book value stands at Rs 184.

A section of analysts feel that RIL may float a 3:5 bonus. There is a possibility of a 3:5 bonus from Reliance Industries. The strategy could be to wait for the Companies Bill to pass in Parliament on the buyback of shares so that no major effect takes place on the equity. The earning per share is balanced to that extent, said Suresh Iyer, petrochemical analyst at P R Subramanyam & Sons.

UTI chief general manager (market operations) B G Daga said Reliance may issue a liberal bonus.

The last bonus announced by Reliance was nearly 14 years back. Any growing company has to bring its equity in line with the reserve position. They call it a realignment of the capital structure. The outlook seems to be good for the stock.

Leading NSE broker Pashupati Advani said: It has been a good year for Reliance Industries on the whole.

Also, this year the companys bottomline will be even better following the commissioning of its cracker plant at Hazira. I feel that this is the apt time for the company management to honour its promise to the shareholders.

The countrys second largest private sector company had a bad year in 1996-97, posting a mere 1 per cent rise in net profit from Rs 1,305 crore in 1995-96 to Rs 1,323 crore in 1996-97.

Reserves and surplus grew from Rs 7,747 crore on March 31, 1996, to Rs 8,013 crore at the end of March 1997. Earnings per share increased from Rs 27.90 to Rs 28.70 in 1997.

The company is seeking to consolidate its position in the petrochemicals sector with a Rs 9,000 crore complex, which is coming up at Hazira.