Reliance Industries, led by Mukesh Ambani, has just made an exciting announcement for its shareholders. The company revealed that its Board of Directors will meet on September 5, 2024, to discuss and recommend a bonus share issue in the ratio of 1:1. This means that for every share you own, you’ll receive an additional share, free of charge.
Stock Reaction and Performance
Following the announcement, Reliance’s stock price surged by 2.6%, reaching ₹2995.75. This brings the stock just 4.4% away from its all-time high of ₹3,217.90, achieved on July 8, 2024. The stock has also risen by over 38% from its 52-week low of ₹2,221.05, recorded on October 26, 2023. In the past year, the stock has gained approximately 24% and has increased by 19% year-to-date in 2024.
What Are Bonus Shares?
Bonus shares are additional shares given to existing shareholders at no extra cost, based on the number of shares they already own. In a 1:1 bonus issue, a shareholder with 100 shares would receive an additional 100 shares, effectively doubling their total holdings. While the number of shares increases, the share price usually adjusts downward to reflect the increase in total shares.
Impact on Investors
Bonus shares are a way for companies to reward their shareholders and enhance shareholder value. Although the share price will typically decrease following the issue to account for the increased number of shares, the overall investment value remains relatively stable. Mukesh Ambani highlighted this virtuous cycle of growth and reward in his address during Reliance’s 47th Annual General Meeting, emphasizing that as Reliance grows, it ensures its shareholders benefit handsomely, fostering further company growth.
