Reliance Industries shares traded in the green on Thursday, following the announcement of October 28, 2024, as the record date for determining the equity shareholders eligible for its upcoming 1:1 bonus issue. The move comes ahead of the conglomerate's 28th Annual General Meeting (AGM), where the bonus issue was initially announced on September 5, 2024.
Shares of Mukesh Ambani-led Reliance Industries opened 0.8% higher at ₹2,731.4 on the National Stock Exchange (NSE). By 9:25 am, the stock was trading at ₹2,725.80, marking a 0.6% increase. This positive momentum suggests that investors are optimistic about the bonus share issue, which will provide shareholders with one free equity share for each share held as of the record date. This marks the sixth instance of Reliance issuing bonus shares, with previous issuances occurring in 2017, 2009, 1997, 1983, and 1980.
Q2 results reveal a mixed performance
While Reliance shares are gaining traction, the company's latest financial results for the July-September quarter revealed some challenges. Reliance reported a 4.7% decline in net profit, which fell to ₹16,563 crore in Q2 FY25, compared to ₹17,394 crore in the same period last year. This decline was mainly attributed to weak performance in the oil refining and petrochemical business, which faced unfavourable global demand-supply dynamics.
Despite this, certain segments showed resilience. Jio Platforms Limited recorded a 17.8% increase in EBITDA year-on-year, driven by a better subscriber mix and telecom tariff revisions. Similarly, Reliance Retail Ventures Limited saw a 30 basis points improvement in EBITDA. Mukesh Ambani, Chairman and Managing Director of Reliance, emphasised that the company's diversified portfolio helped to partially offset the subdued earnings from its oil-to-chemicals (O2C) business.
Rising debt levels
The company's debt rose to ₹3.36 lakh crore in Q2 FY25, up from ₹3.04 lakh crore in the previous quarter and ₹2.95 lakh crore in Q2 FY24. However, when factoring in cash reserves, Reliance's net debt stood at ₹1.16 lakh crore, almost unchanged from ₹1.17 lakh crore in the same period last year.
Focus on growth and diversification
Despite the mixed financial performance, Mukesh Ambani remains optimistic about Reliance's future prospects. He highlighted the company's growth in digital services and upstream business as key contributors to its ongoing success. "Our performance reflects robust growth in digital services and upstream business. This helped partially offset weak contribution from the O2C business," Ambani said.
The company's strategic initiatives in retail are also expected to contribute significantly to its growth trajectory. "The focus on strengthening our retail operations will help us rapidly scale up this business in the coming quarters and years and sustain our industry-leading growth momentum," Ambani added.
Why does the bonus issue matter to investors?
The announcement of the bonus share issue is expected to increase investor interest in Reliance Industries, making it an attractive option for those looking to invest in stocks. Bonus shares can make shares more affordable and increase the liquidity of a stock, often leading to a broader shareholder base. Given Reliance's history of rewarding its shareholders with bonus issues, investors may view this as a sign of the company's confidence in its growth prospects.
How to approach investing in stocks like Reliance?
For investors looking to invest in stocks, Reliance's upcoming bonus issue presents an opportunity to gain exposure to a well-established conglomerate with a diversified business portfolio. The company's consistent history of bonus issues and strategic growth initiatives can make it an attractive option for long-term investment. However, investors should also consider the recent dip in profits and rising debt levels when making decisions. As always, it's crucial to do thorough research and consider one's risk tolerance before deciding to invest in stocks.
Conclusion
Reliance Industries' announcement of October 28 as the record date for its 1:1 bonus share issue has sparked a positive reaction in the stock market. Although the company faced challenges in its latest quarterly results, its focus on growth in retail and digital services, along with the upcoming bonus issue, makes it a compelling choice for those looking to invest in stocks. Investors should keep an eye on the company's future performance as it navigates a dynamic business environment while continuing to reward shareholders.
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