Reliance Industries Announces 1:1 Bonus Shares and Forfeiture of Unpaid Shares: Key Details from Board Meeting Outcome

Introduction

Reliance Industries Limited (RIL) has recently made significant announcements that have caught the attention of its shareholders and the broader market. The company has not only recommended issuing bonus shares but also approved the forfeiture of partly paid-up equity shares on which call money remains unpaid. In this blog, we will explore the implications of these corporate actions, their impact on shareholders, and why they matter.

Key Announcements by Reliance Industries

1. Bonus Issue: The Board of Directors has recommended a 1:1 bonus share issue, meaning one new fully paid-up equity share of Rs 10 will be given for every existing fully paid-up equity share held by shareholders on the record date. This move will double the number of shares available in the market.
2. Forfeiture of Unpaid Shares: The company has approved the forfeiture of partly paid-up equity shares on which call money, either the First Call or the Second and Final Call, remains unpaid. Shareholders who fail to pay the call money by September 20, 2024, will have their shares forfeited, leading to a reduction in their shareholding.
3. Increase in Authorised Share Capital: To accommodate the bonus issue, Reliance Industries has proposed increasing its authorized share capital from Rs 15,000 crore to Rs 50,000 crore. This expansion ensures that the company has sufficient authorized capital to issue the bonus shares without affecting its operational liquidity.

Financial Implications

• Capitalization of Reserves: The bonus shares will be issued by capitalizing from the securities premium, general reserve, and retained earnings. As of March 31, 2024, these reserves stood at Rs 99,802 crore, Rs 2,56,549 crore, and Rs 1,03,213 crore, respectively. This robust financial position allows RIL to reward its shareholders while maintaining a strong balance sheet.
• Impact on Share Capital: The pre-bonus paid-up share capital stands at Rs 6,766.23 crore, comprising 676.62 crore equity shares. Post the bonus issue, the paid-up share capital will double to Rs 13,532.46 crore, with 1,353.24 crore equity shares in circulation.
• Record Date and Dispatch: The record date, which determines shareholder eligibility for the bonus shares, will be announced separately. The company has set a target to credit or dispatch the bonus shares on or before November 1, 2024.

Implications for Shareholders

• Enhanced Liquidity: Issuing bonus shares increases the total share count, thereby improving the liquidity of the stock. This often makes the stock more attractive to retail investors and can lead to increased trading volumes.
• Potential Impact on Share Price: While the share price may adjust downward to reflect the increased share count, the overall value of each shareholder’s investment remains the same. The bonus issue is often perceived positively as it signals the company’s confidence in its financial health and future growth prospects.
• Forfeiture of Unpaid Shares: Shareholders who have not paid their call money must do so by the deadline to avoid forfeiture. This forfeiture will reduce the number of shares in circulation but will not affect the shareholders who have fully paid for their shares.

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.