The board of Mukesh Ambani-led Reliance Industries Ltd (RIL) will consider a proposal for bonus share issue on Thursday, September 5. This would be the sixth time when the RIL board would consider bonus shares, the last ones were in 2017, 2009, 1997, 1983 and 1980.
RIL declared its last bonus shares in the ratio of 1:1 in 2017. The stock turned ex-date on September, 7, 2017. It had announced a similar bonus share ratio in 2009, with the stock turning ex-date on November 26 that year. The 1997 bonus issue too was declared in the 1:1 ratio. The 1983 bonus shares were offered in the 6:10 ratio and 1980 in the 3:5 ratio.
Since the last bonus issue in 2017, RIL shares have rallied 316 per cent over a span of seven years. RIL also announced a total five rights issues, the last one in May 2020.
"RIL has announced bonus issue of 1:1, for which board meeting is scheduled on September 5, 2024. This should result in an increase in equity capital by Rs 6,770 crore while its reserve may reduce by a similar amount," ICICI Securities said. Adjusted EPS estimates post bonus issue would be Rs 53.40 for FY25, Rs 62.20 for FY26 and Rs 69.60 per share for FY27, it said..
Despite a stellar expected EPS growth (14.2 per cent over FY25–27) and the 1:1 bonus issue, the brokerage retained its cautious stance on RIL, owing to high multiples, muted free cash flow yields and return ratios. It suggested a target of Rs 2,970 on the stock.
At its 47th AGM, Ambani did highlight the consistent track record of rewarding shareholders, and announced a 1:1 bonus. "But, unlike our (and Street) expectations, there was no mention of R-Jio and/or Retail de- merger and listing timelines. With telecom tariff hikes in place, Retail and O2C subdued, there are no near-term catalysts, in our view. Maintain ADD with an unchanged FV of Rs 3,200," Kotak Institutional Equities said.
Emkay Global said it maintained a positive stance on RIL and retained its 'ADD' rating for the stock with a target price of Rs 3,335. "RIL is our top pick in India Energy, and we reiterate our Buy rating with a target price of Rs 3,600. We see robust growth across segments driving 3-year Ebitda CAGR of 13 per cent, which will further be boosted by a sharp increase in FCF generation and sharp decline in net debt levels. Further, a demerger/IPO of the consumer facing businesses of Jio and RR in the coming years can unlock further value for RIL," Nomura India said.
Antique Stock Broking said it remains neutral on the stock with a 'Hold' rating and a SoTP target price of Rs 3,213, as it believes most of the visible growth is discounted.
Meanwhile, JM Financial in a technical note said all the major RIL selling in the last 10 months ended marginally below the 100-day EMA level, which is currently placed at Rs 2,958 level. The September F&O series started with a cumulative future open interest of 48.7 million shares against the average of 40 million shares in the last three series. Most accumulation seems to be on the long side, suggesting bullish sentiments are prevailing on the counter, JM Financial said.
"Post the decline from highs of Rs 3,218 level, the RIL stock has been forming a pattern of higher top higher bottom, a bullish formation. It has started trading above all its key long term and short term EMAs, suggesting further strength to prevail," it said.