MUMBAI, June 19: Dhirubhai Ambani has kept his promise to shareholders made at the company's last annual general meeting. In a notice to stock exchanges, Reliance Industries has announced that its board will meet on June 26 to consider the issue of bonus shares.

The bonus, when announced, will break a 14-year drought. The company last announced a bonus (3:5) in 1983, but ever since it has avoided offering free shares to its shareholders. Instead, it has given what management insiders consider mini-bonuses—discounted rights issues to shareholders. However, many shareholders at the last AGM were insistent on the need for a bonus, and chairman Ambani hinted that this might be possible before the next AGM. That AGM is now due on June 26, the same day on which the board will meet to consider the bonus ratio. With a share capital of Rs 458.45 crore and reserves of Rs 6,865.69 crore, the company can easily offer a generous share split.

News about the board meeting sent the Reliance share shooting up from the day's low of Rs 318.50 to touch an intra-day high of Rs 343 on the BSE. The share spurted by 6.07 per cent on the exchange to close at Rs 340.50. On the NSE, the gain was 5.61 per cent at the closing price of Rs 341.90.

About 4.8 crore shares changed hands at the two exchanges, contributing about 30 per cent (Rs 297.69 crore) to the turnover recorded on the BSE and over 25 per cent (Rs 689.28 crore) on the NSE.

"When the market had almost discounted the bonus issue, this news has actually accentuated the bull run," said a BSE member. A correction in the 30-share Sensitive index was curbed today at 4,046 following the Reliance announcement.

"A bonus gives out signals on the company's judgement about their performance in the future," said Sandeep Shah of Kotak Securities. "Its outcome is often a short-term upward price trigger," he added. But not many are convinced about the fundamentals.

Marketmen seem to be expecting a ratio of 1:2 or 3:5 on the lower side. However, analysts say that the bonus issue would mean a substantial increase in the already huge equity base of Rs 458 crore. At 1:2, the base would expand to Rs 688 crore; at 3:5 it would be around Rs 733 crore.

"This would necessarily bring down their earnings per share," said a research analyst. However, the return on net worth is the indicator to watch. A section of brokers is convinced that the RIL.

Reliance management will definitely give a `cash bonus', which could also be called a modified version of dividend. A cash bonus is a micro-bonus that shareholders can cash like a dividend. But the Reliance board has already announced a dividend of Rs and hence there are not many takers for this theory. According to technical analysts, Reliance will see a correction to Rs 335. But if the rally continues, it could see a new bottom being established at Rs 352. If the bull run continues, the share could touch a new post-budget high of Rs 384.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.