(Bloomberg) -- Reliance Industries Ltd. said it will consider a bonus issue of shares — the first in seven years — as its billionaire-chairman Mukesh Ambani looks to attract small shareholders amid a continuing diversification into consumer-facing businesses.
The board of the retail-to-refining conglomerate will meet Sept. 5 to consider issuing one new share for every existing held, according to an exchange filing Thursday. Shares closed 1.5% higher after the unexpected announcement in Mumbai, pushing this year’s advance to almost 18%.
India’s most valuable firm has offered free shares at least three times since 2005, with the last bonus issue announced in 2017. The decision to give existing shareholders an extra share doesn’t impact the market value of their holding, but will serve to boost liquidity of the stock.
It may also appeal to smaller investors at a time when Ambani is deepening his operations into retail industries including supermarkets, beauty and consumer finance.
‘Sentimentally Costly’
“Bonus shares announcement by Reliance is a surprise,” said Pritesh Vaghela, a Pune-based shareholder.
Reliance’s shares have been trading above 3,000 rupee ($35.8) level, which is “sentimentally costly” for some investors and as price gets adjusted upon the share issue, “they may look more affordable,” Vaghela said.
Reliance’s shares, which jumped as much as 2.6% after the announcement, pared gains as Ambani’s annual address to shareholders later in the day lacked details on the listing of its consumer-facing businesses — Reliance Jio Infocomm Ltd. and Reliance Retail Ltd. The company had last year spun off its financial services unit.
Ambani, however, did outline ambitious growth plans for the telecom and retail businesses — both sector leaders that lured more than $27 billion from marquee investors in 2020.
“When Reliance grows we reward our shareholders generously. When our shareholders are rewarded handsomely, Reliance grows faster and creates more value,” Ambani said in the speech to stockholders that’s been compared to Warren Buffett’s annual letters to Berkshire Hathaway investors.
Ambani, Asia’s richest person, got control of the flagship oil refining and petrochemicals business in 2005 after the family split the Reliance Group founded by his father. He has since successfully ventured into consumer facing sectors and more recently green energy.
The pivot helped its telecom and retail units lure more than $27 billion from marquee investors in 2020 and are now overseen by his elder son, Akash Ambani, and daughter, Isha Ambani, respectively.
--With assistance from Ravil Shirodkar.
(Updates closing share price in the second paragraph and adds details on units’ expansion in the eighth. A previous version of this story was corrected to remove a reference to a stock split.)
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