Reliance to Give One Free Share for Each Held
Oct. 7 (Bloomberg) -- Reliance Industries Ltd., India's most valuable company, will give investors one free share for each held for the first time in 12 years.
The board also decided to pay 13 rupees a share as dividend, Reliance Industries, said in a statement to the National Stock Exchange today.
Shares of the company controlled by Mukesh Ambani, India's richest man, have advanced 70 percent this year, rebounding from a decline in 2007, after starting an oil refinery in December and natural gas output from an offshore field in April. The company is fighting a legal battle over the sale of gas to a company owned by Mukesh's estranged brother Anil Ambani. India's Supreme Court is scheduled to start final hearings in the lawsuit on Oct. 20.
"I think they wanted to convey to people through the bonus issue that the stock is undervalued vis-a-vis the fundamentals of the company and that you needn't wait until the outcome of the court case to buy it," said Deven Choksey, chief executive officer of K.R. Choksey Shares & Securities, who manages about 5.5 billion rupees for wealthy individuals. "In fact, the re- rating process may start from tomorrow."
Reliance Industries shares fell 1.5 percent to 2,101.30 rupees in Mumbai trading, declining for the fourth straight day and valuing the company at $74 billion. The free-share announcement was made after the markets closed.
The company raised 31.9 billion rupees ($683 million) last month selling shares at an average of 2,125 rupees apiece. The founders of Reliance Industries held a 49.03 percent stake in the company through individuals and 45 companies as of June 30, according to the Bombay Stock Exchange Web site.
Petroleum Trust, which holds the company's treasury stocks, held 6.65 percent of the shares and Life Insurance Corp. held 5.54 percent. Overseas institutional investors had a combined 16.45 percent, according to the stock exchange Web site.
"The management may be trying to neutralize the negative perception that came from the recent sale of treasury stocks," said Mumbai-based Amitabh Chakraborty, president, equity, Religare Securities Ltd. "The treasury stock sale gave out the perception that the current share prices have reached a cap."
State-owned Indian Oil Corp., the nation's biggest refiner, said Sept. 14 it will give one free share for each held by investors.
Mumbai-based Reliance Industries started processing crude oil at its new, export-oriented refinery in the western state of Gujarat in December. The 580,000-barrel-a- day refinery, built by unit Reliance Petroleum Ltd., is adjacent to the company's 660,000-barrel-a-day plant and the two units have a combined refining capacity of 1.24 million barrels a day.
Reliance Industries said Feb. 27 it would acquire the remaining shares of unit Reliance Petroleum, which spent $5.34 billion to build the new refinery. The explorer plans to spend $8.8 billion over the 11-year life of the KG-D6 gas field to develop the area.
"Reliance's gas business and the integration of Reliance Petroleum will add about 50 billion rupees to profit in the year to March 31, 2010," said Choksey. "That will ensure the enhanced share capital can be serviced without denting profits from existing business."
At peak output rate, supply of gas from the KG-D6 field may double availability of the fuel in India. Anil Ambani's Reliance Natural Resources Ltd. wants Reliance Industries to supply gas at a 44 percent lower rate than the price approved by the government in 2007.
The gas sale agreement was signed in 2005, after the Ambani family business was split between the two brothers.
Reliance Industries posted a group net income of 156.4 billion rupees in the year ended March 31, 2009, according to a separate statement to the Bombay Stock Exchange.
To contact the reporters on this story: Rakteem Katakey in New Delhi at firstname.lastname@example.org Ravil Shirodkar in Mumbai at email@example.com .