Bonus peps up market morale

MUMBAI, Juen 26: The Reliance bonus issue has come as a morale booster at a time when investor confidence in the capital market has taken a...

MUMBAI, Juen 26: The Reliance bonus issue has come as a morale booster at a time when investor confidence in the capital market has taken a severe beating. The immediate impact of the bonus will be that 26 lakh shareholders all over the country will get free shares of Reliance Industries.

The RIL bonus is the culmination of a series other bonus issues (including Century Textiles, Maharashtra Scooters and Indian Rayon) and mixed performance by leading companies. “The Reliance bonus has helped the stock market to sustain the recent rise in Sensex, especially after the company sent a notice to the exchanges about the bonus. Otherwise the market would have fallen further, especially at a time when political uncertainty is casting a shadow over the markets,” said an official with a leading foreign investment firm who preferred anonymity.

Reliance has been the market leader on the stock exchanges. When the 1:1 bonus issue was announced on Thursday, the RIL scrip touched the 52-week high of Rs 388 but came down later to close at Rs 377.25. “Had the session not been end of the current account, the price would have crossed Rs 400 today,” said a BSE director.

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While the National Stock Exchange recorded a whopping turnover of Rs 1580 crore in RIL, the BSE registered Rs 494 crore turnover in the RIL scrip. This is for the time both NSE and BSE recording a turnover of over Rs 2,000 crore in a single scrip. “It was Reliance was all the way,” said an analyst with Kotak Securities.

Said Sanjay Agarwal, chief executive, Lloyd’s Securities, “Reliance has announced a very generous bonus in line with its excellent financial performance for 1996-97. I expect a lot of interest in the company’s stock from institutional investors.

The market is poised to rally 100 to 150 points. It’s a buoyant market, and there is institutional buying taking place, and there are no real negative factors apart from one or two political ones. I expect the market to be at 4,700 or 4,800 mark by the end of the year.

" With a shareholding base of 26 lakh, Reliance has the largest family of shareholders for any Indian company. The company’s equity capital which is now at Rs 458 crore will go up to Rs 900 crore after the bonus issue.

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Reliance now enjoys a market capitalisation of nearly Rs 20,000 crore — 2,000 times of the market capitalisation of Rs 10 crore in 1977. “We have achieved this as a first generation enterprise. We have grown from within, in an entirely organic manner,” Ambani said.