“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 KR Choksey Shares & Securities, who manages about 5.5 billion rupees for wealthy individuals. “In fact, the re- rating process may start from tomorrow (Thursday),” he told Bloomberg.

Shares of the Mukesh Ambani firm have advanced 70% this year, rebounding from a decline in 2007, after starting an oil refinery in December and beginning natural gas output from an offshore field in April. The company is fighting a legal battle over the sale of gas to Reliance Natural Resources Ltd, a company owned by estranged brother Anil Ambani. The Supreme Court is scheduled to start final hearings in the lawsuit on Oct 20.

The RIL board, which met here Wednesday, has also proposed an interim dividend of Rs 13 per share for the financial year 2008-09. This will result in a payment of Rs 2,219 crore, inclusive of taxes of Rs 322 crore. Shares of the company dipped 1.57% to close at Rs 2,099 on the Bombay Stock Exchange on Wednesday. The bonus issue announcement came in after the market hours.

Both the bonus shares and dividend will also accrue to the shareholders of erstwhile Reliance Petroleum Ltd (RPL), which has been amalgamated recently with the oil & gas major.

The group also announced its consolidated audited results for the year ended March 31, 2009. Its net profit dipped 0.18% to Rs 15,296 crore.

Sales stood at Rs 1,53,138 crore against Rs 1,38,371 crore, up 10.6%. The announcement of audited financial results for 2008-09 came late as the merger of Reliance Petroleum with RIL needed regulatory and court approvals. The company had announced its unaudited FY09 results in April this year.

The figures include those of Reliance Petroleum Ltd (RPL), which amalgamated with the company with effect from April 1, 2008, and are therefore, not comparable with those of previous year, the company said in the filing.

While announcing the bonus issue, Alok Agarwal, chief financial officer at RIL, said, “We are on track with the production ramp-up for our KG D6 oil & gas fields off India’s east coast, and we have the financial flexibility to make further investments. RIL is now ready to invest for the future. It has a strong balance sheet, large cash reserves and substantial financial flexibility owing to its treasury stock holding.” He said the company has produced 2.7 million tonnes of crude oil and 5 billion cubic metres of gas from the KG D6 field since April 1, and started 16 of 18 wells needed to achieve maximum capacity.