Ambani springs a surprise, goes for 1:1 bonus

As soon as the AGM ended, the board of directors met at the same venue for a brief period of 15 minutes. After the board meeting, Ambani, who looked healthy and cheerful, made the bonus announcement to the waiting shareholders.

This was welcomed by a thumping applause from the shareholders. The Reliance share rose by Rs 10.50 to Rs 377.25 on the Bombay Stock Exchange. The RIL business volume on both BSE and National Stock Exchange amounted to a whopping Rs 2074 crore.

Earlier at the AGM, Ambani agreed to the shareholders’ suggestion that the equity of the company should not be diluted till the year 2000 and keep the share prices within the reach of Indian shareholders whose stake in the company’s capital was getting diluted with foreign institutional investors (FIIs) and mutual funds progressively increasing their equity in the company.

The company’s equity capital currently stands at Rs 458 crore. “We’ll review actively a programme of future bonus share issues to enhance shareholders value,” Ambani promised in his statement to the shareholders.

The last bonus issue by the company was in the ratio of three-for-five 14 years ago in 1983. The company later made several rights issues, convertible/bond and GDR issues, but a bonus issue eluded the shareholders.

In fact, the last year’s AGM Ambani had promised the shareholders about a bonus issue by saying “shareholders won’t have any cause for complaint by the next AGM.” “Ambani has more than kept his promise,” said a shareholder who came from Pune to attend the AGM.

Addressing shareholders, Ambani said based on firm plans the company’s sales are expected to approach the Rs 20,000 crore milestone by the year 2000.

“We have set outselves the targets of achieving a 20 per cent compunded growth in earnings per share and a return of 20 per cent on shareholders’ funds over the next five years. These objectives will ensure sustainable returns to the company with a healthy margins over its cost of capital through business cycles,” Ambani said.

Ambani maintained that Reliance aims at regularly increasing the dividend rate. “The dividend policy emphasises a reasonable dividend payout ratio of around 25 per cent, subject to growth plans and the needs for capital planning flexibility,” the Reliance chairman said.

He also announced the intention of going ahead with the share buy-back plan. “The new companies act, which is yet to become law, would enable use to examine this option to enhance shareholder value,” Ambani said.