Reliance Industries Bonus Issue: A Sweet Deal or a Stock Market Trap?

Reliance, a Fortune 500 company and one of India's largest private-sector corporations has been a trusted name for decades.

Its vast portfolio, comprising over 75 distinct brands, touches various sectors from energy to retail.

As one of the most influential companies, its innovations and expansions continue to be a topic of interest for both investors and the industry alike.

Reliance Industries, the main holding company of the Reliance group, is set to reward its shareholders with an upcoming bonus issue.

These free shares essentially act like a stock dividend, multiplying existing holdings and boosting the overall share count without impacting the company's core value.

Here's all you need to know about Reliance Industries' upcoming bonus issue.

• Reliance Industries on 16 October 2024, received approval for the bonus issue from shareholders with an overwhelming 99.92% of votes cast in favour of the resolution.
• Reliance Industries has announced bonus shares in the ratio of 1:1. A 1:1 bonus issue ratio would mean that Reliance will allot 1 new fully paid-up equity share of Rs 10 face value, against every 1 existing equity share of Rs 10 face value.
• The company has fixed 28 October 2024 as the record date for the same.
• This will be the largest-ever issuance of bonus equity shares in the Indian equity market.
• Just as Reliance has promised, it plans to coincide the bonus issue with the upcoming festive season in India and as an early Diwali Gift. Diwali festival 2024 is going to kick start from 29 October 2024.
• The board also approved an increase in authorised share capital from Rs 150 bn to Rs 500 bn.

The bonus shares will be issued by capitalising from the company's securities premium account, general reserves, or retained earnings.

The company's pre-bonus paid-up capital currently stands at Rs 67.7 bn, consisting of 6.7 bn equity shares of Rs 10 each, including partly paid-up shares.

After the bonus issue, the paid-up capital will double to Rs 135.3 bn, comprising 13.5 bn equity shares.

The company estimates that Rs 67.7 bn will be required to implement the bonus issue, and the final amount will be based on the paid-up capital on the record date.

Reliance Bonus History

It will be the first bonus issue by Reliance in seven years. This marks Reliance's sixth bonus issue and the first since 2017.

The first bonus issue was in 1980 at a ratio of 3:5, followed by a 3:5 bonus issue in 1983.

The most recent three bonus issues, in 1997, 2009, and 2017, have all been in the ratio of 1:1.

Reliance Industries Bonus History

Year	Bonus Ratio
1980	3.5
1983	3.5
1997	1.1
2009	1.1
2017	1.1
2024	1.1

Source: Equitymaster

Recent Developments

# Reliance-Disney Merger

On 22 October 2024, the Competition Commission of India (CCI) released a detailed 48-page order approving the merger of media assets between Reliance Industries and Walt Disney, subject to specific conditions, including the divestment of seven TV channels.

As part of this US$ 8.5 bn merger, the companies voluntarily agreed not to bundle TV advertising slots for IPL, ICC, and BCCI cricketing rights until the existing agreements expire.

The channels being sold include Hungama and Super Hungama. Last month, the Ministry of Information and Broadcasting (I&B) had already approved the transfer of non-news and current affairs television channel licenses in preparation for the merger.

This approval allows channels held by Viacom18 Media Pvt Ltd to be transferred to Star India.

Following the merger, Reliance is set to control over 60% of the new combined entity-16% directly and 47% through its ownership of Viacom18 Media-while Disney will retain 37%.

The merged company will encompass two streaming services and 120 television channels, with Reliance owning Viacom18 Media and Digital18, and Disney overseeing Star India and Star Television.

# UK's Mothercare Collaboration

Mothercare has established a joint venture with Reliance Brands Holding UK to enhance its presence in the South Asian market. As part of this collaboration, the company has also refinanced its existing debt facilities with Gordon Brothers.

Reliance Brands, a subsidiary of Reliance Industries Ltd, has acquired a 51% stake in the joint venture, which encompasses the Mothercare brand and its associated intellectual property in India, Nepal, Sri Lanka, Bhutan, and Bangladesh, for ₤16 million (US$ 21 m). Mothercare will retain the remaining 49% stake.

Further, in September, Reliance expanded its footprint in India's apparel market by partnering with Israeli innerwear manufacturer Delta Galil, with the goal of doubling its retail business in the next three to four years.

A Close Look at Financials

For the September 2024 quarter, Reliance Industries' gross revenue showed a modest increase of 0.8% YoY, reaching Rs 2.6 trillion (tn), compared to Rs 2.5 tn in the same period last year.

It reported a net profit of Rs 165.6 bn, down 4.7% YoY.

Taking a broader view over the past five years, Reliance Industries has demonstrated impressive growth.

Reliance Industries Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	5,350,730.0	3,946,100.0	6,031,830.0	7,808,060.0	8,020,060.0
Revenue Growth (%)	4.3	(-26.3)	52.9	29.4	2.7
Net Profit	398,800.0	537,390.0	661,840.0	736,700.0	790,200.0
Net Profit Margin (%)	7.5	13.6	11	9.4	9.9
Return on Equity (%)	8.9	8.1	8.5	10.3	10
Return on Capital Employed (%)	11.7	9.3	10	12.6	12.6

Source: Equitymaster

From FY20 to FY24, the company achieved a compound annual growth rate (CAGR) of 9.3% in sales, while its net profit surged by 14.7%.

Additionally, Reliance Industries has consistently maintained strong financial metrics, with an average return on equity (RoE) of 9.2% and a return on capital employed (RoCE) of 11.2%.

What Next?

Reliance Industries is embarking on an ambitious journey with the construction of the Dhirubhai Ambani Green Energy Giga Complex, spanning over 5,000 acres in Jamnagar, Gujarat, India.

This complex will house various giga factories, including a manufacturing facility for electrolysers, aimed at producing green hydrogen. The Dhirubhai Ambani Green Energy Giga Complex is poised to be one of the largest integrated renewable energy manufacturing facilities in the world.

In addition to green hydrogen initiatives, Reliance is actively pursuing wind power generation by establishing a manufacturing ecosystem that enables cost-efficient wind energy production at a giga scale. The company plans to transition to green hydrogen production by 2025 and aims for net-zero emissions by 2035.

To support its clean energy ambitions, Reliance intends to invest Rs 750 billion over the next three years to develop its clean energy business.

Furthermore, it has outlined plans to invest Rs 5 trillion over the next 10 to 15 years to establish a 100 GW renewable energy power plant and develop a comprehensive green hydrogen ecosystem.

As part of its forward-looking strategy, the board has also announced several projects focusing on digital transformation and artificial intelligence (AI) to drive future growth.

How Shares of Reliance Industries have Performed Recently

The share price of Reliance Industries declined by 9% in the past one month.

Over the past one year, shares of the company have gained 18%.

The company touched its 52-week high of Rs 3,217.6 on 8 July 2024 and its 52-week low of Rs 2,220.3 on 26 October 2023.

About Reliance Industries

Reliance Industries is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production.

The company has strong competitiveness in the global oil refining and petrochemicals business, arising from its integrated business model with superior complexity index of 21.1 for its Jamnagar site. This makes it among the most complex sites in the world.

Moreover, it's among the top 10 global petrochemical manufacturers and the leading player in India.

In the recent past, consumer facing businesses including retail and digital services have become Reliance's principal growth drivers.

To know more about the company, you can check out Reliance Ind. company fact sheet and quarterly results.

For a sector overview, read our energy sector report.

You can also compare Reliance with its peers:

Reliance vs ONGC

Reliance vs BPCL

Reliance vs IOC

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