Mukesh Ambani Reveals 1:1 Bonus Issue Plan at RIL AGM

Reliance Industries Limited (RIL) announced at its 47th annual general meeting (AGM) on Thursday, August 29, that its Board will meet on September 5 to discuss a potential bonus issue.

As India’s largest company by market capitalisation, RIL is considering giving out bonus shares at a 1:1 ratio, meaning one bonus share for every share currently held. More details will be shared soon.

Mukesh Ambani, Chairman and Managing Director, stated, “Reliance Industries Limited has informed the stock exchanges that the Board will meet on September 5 to consider a 1:1 bonus share issue.”

This means that Reliance Industries’ shareholders will get one bonus share for each share they currently own over a set period.

What Is A Bonus Issue?

As an investor or someone considering investing in the stock market, you might come across the term “bonus issue” of shares. A bonus issue happens when a company gives out extra shares for free to its current shareholders.

The company’s board of directors decides how many additional shares each shareholder will receive. For instance, if a company announces a bonus issue, it might offer one extra share for every two shares a person already owns.

The company determines how many bonus shares each investor will receive based on how many shares they hold and for how long. This bonus issue is designed to attract more investors and reward current shareholders, enhancing the company’s market reputation.

While a bonus issue will increase the company’s share capital, it does not affect its market capitalisation.

A bonus share issue is funded by the company’s strong profits, as shown in its annual or quarterly reports or from its share reserves. This kind of issue can attract investors, making the company seem more appealing to individual investors. However, there is a downside: the company might have used the money for the bonus shares in other business activities. This can be seen as a missed opportunity for both the company and its shareholders.

If you’re an investor who receives bonus shares, you’ll still need to pay capital gains tax when you sell those shares, including the bonus ones. On the other hand, the company does not have to pay taxes on the bonus shares it issues.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.