Bonus Candidate Stocks

Bonus Candidate Stocks

Reliance Bonus Impact

Reliance Industries Ltd sprang a pleasant surprise on Wednesday, announcing a 1:1 bonus share issue, the first time in 12 years.

According to a proposal approved by the RIL board on Wednesday, all shareholders will get one free share for every share held by them.

Around 35 lakh shareholders will benefit from, what is being termed a ‘Diwali bonus’. The last bonus issue (also 1:1) by RIL was in 1997.

The RIL board also proposed an interim dividend of Rs 13 per share for 2008-09. The dividend will entail an outgo of Rs 2,219 crore, including Rs 322 crore in taxes, said a senior company official. The board also approved the audited results of RIL for the year ended March 31, 2009.

In a notice to the stock exchanges, RIL said: “The board of directors , at its meeting held on October 7, inter alia, has recommended, subject to the approval of the shareholders, issue of bonus shares in the ratio of one equity share of Rs 10 each fully paid up for every one equity share of Rs 10 each of the company. “

Mr Alok Agarwal, RIL’s Chief Financial Officer, said that shareholders of Reliance Petroleum Ltd, which was recently amalgamated with RIL, will also get the same bonus and interim dividend. Since the demerger of the group, RIL has created value of Rs 2,47,000 crore in market capitalisation. Shareholders have earned a 40-per cent compounded return, he said.

“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 holdings, which have a current value of nearly Rs 40,000 crore,” Mr Agarwal said. The company recently sold 1.5 crore treasury shares worth Rs 3,188 crore.

“It was indeed a big surprise as usually this kind of announcement is made at annual general meetings,” said Mr Prayesh Jain, an analyst at India Infoline. There was no run-up in the stock price in the past few days, which indicates that the announcement was unexpected, he said.

RIL is currently locked in a battle with Reliance Natural Resource Ltd over the pricing of gas from the KG basin.

Analysts expect the RIL bonus issue to put pressure on the Anil Ambani group to make similar announcement.
Market impact

Mr Manish Sonthalia, Fund Manager, Motilal Oswal Financial Securities, said RIL bonus announcement will have a short-term positive impact in the markets. It shows that the company is confident of being able to service its expanded equity capital and give returns to its investors in the long term, said Mr Sonthalia.

Some market participants expect RIL to go in for a buy-back as the ex-bonus share price could turn attractive.

RIL shares closed at Rs 2,099 on BSE on Wednesday, down 1.57 per cent, over the previous close. The bonus announcement came after the market hours.

Mr Agarwal said that during the past four years, a period of significantly higher capital costs, shortage of capital globally and constrained resources for large-scale projects, RIL commissioned the Jamnagar refinery and the Krishna-Godavari Basin D6 upstream gas project. He said the company currently owns nearly 25 per cent of the world’s complex refining capacity. RIL is the only large refining company in the world today that operates its facilities in excess of 100 per cent of rated capacity, he said.

Mr Agarwal said that the KG D6 production ramp-up is on track, with 100 per cent uptime achieved since the facility went on stream on April 1, 2009.

via BL

RIL board approves 1:1 bonus issue

Mukesh Ambani group firm Reliance Industries today said it will issue one bonus share for every share held in the company

The board of directors of the company at its meeting held today, recommended issuance of bonus shares in the ratio of one equity share of Rs 10 each for each share held, RIL said in a filing to the Bombay Stock Exchange.

The issue of bonus shares is subject to the shareholders' approval, it added.

The board has also declared a dividend of Rs 13 per fully paid-up equity share of Rs 10 of the company to the shareholders, the company said.

Shares of RIL today closed down 1.57 per cent at Rs 2,099 on the Bombay Stock Exchange.

via Economic Times

Reliance Power - dumped post bonus

Reliance Power Ltd shares tumbled below market expectations on Friday when these started trading ex-bonus, touching an intra-day low of Rs231.70 while analysts had expected the stock to settle at Rs270-280 post bonus.
“This was a really disappointing performance, we were actually expecting the stock to close between Rs330-360,” Anurag Purohit, research analyst with Religare Securities Ltd, said.
Reliance Power had announced in February it would give three bonus shares for every five held.
“Certain selling was expected, especially because of the run up the stock had witnessed post the announcement of the bonus issue, but it was certainly not expected that the stock will fall to the levels it did. Even in a worst-case scenario, we were expecting a closing of about the Rs280 mark,” Purohit added.
“This will certainly trigger a panic among retail investors, and going forward, we can expect profit booking at every rise.”
The stock closed at Rs235.85 on Bombay Stock Exchange (BSE), below the post-bonus cost of shares.
The bonus issue of three shares for every five held had brought down the cost of each Reliance Power share held to Rs269 for retail investors and Rs281 for institutions. The company had offered the shares at a discount of Rs20 to retail investors at Rs230 a share, as against a price of Rs250 for institutional investors.
The founder-promoters of the company, including Reliance Anil Dhirubhai Ambani Group (R-Adag) chairman Anil Ambani and Reliance Energy Ltd, who together held 90% of Reliance Power’s equity, were not issued any bonus shares. The promoters, however, had acquired shares in Reliance Power at Rs17 each.
The company had set 30 May as the ex-date. Investors holding Reliance Power stock at the end of trading on 2 June will be given the bonus shares, the company said in a statement to BSE on 5 May.
The share sale of Reliance Power, India’s biggest domestic initial public offering (IPO) thus far raising Rs11,700 crore, was sold out in less than a minute. But on the listing day, 11 February, the shares plunged and closed at 17.22% below the issue price of Rs450.
Meanwhile, R-Adag has another initial public offering in the pipeline. The group plans to offload a 10.05% stake in Reliance Infratel to raise Rs5,000-6,000 crore through the IPO.
“Raising money in the Reliance Infratel IPO, given the current market price of the Reliance Power share, is going to be challenging for the group as it has lost a lot of investor confidence since the listing of Reliance Power,” said Arun Kejriwal, director, Kejriwal Research and Investment Services, a Mumbai-based advisory firm.
“He (Anil Ambani) has tried everything possible to regain investor confidence since. He will have to pull another rabbit out of the hat to make the Reliance Infratel offering successful.”
Reliance Power plans to set up 13 plants with 28,200MW of generating capacity. Seven of these will start operating in the first five years, with the first plant in the line-up starting production in 2009.
“There are no fundamentals to judge the performance of the company as of now, so it is very difficult to know how the stock will react going forward,” said an analyst with a domestic brokerage, who did not wish to be identified.

Reliance Power Bonus

Reliance Power has gone ex-Bonus today -

Bonus ratio is 3:5

Reliance Power Bonus - 3 shares for every 5 shares held

Anil Ambani-promoted Reliance Power shareholders, who were battered on the listing day of the scrip, effectively reduced their losses by as much as 40% over the IPO price after the company announced the bonus issue on Sunday.

The board of directors at its meeting considered and approved a bonus issue, excluding promoters, wherein three shares would be allotted for every five held by the non-promoter shareholders.

"This move would effectively reduce the cost of Reliance Power shares from the IPO price," Reliance Power Chairman Anil Ambani said. Retail investors were allotted the shares at Rs 430 while institutional investors got it at Rs 450.

ursuant to this bonus issue, retail shareholders would receive the shares at Rs 269 each while for institutional shareholders, it would be Rs 281 per share.

"Compared to the IPO price, for the retail investors it represents a reduction of 40 per cent and for institutional 37 per cent," Ambani added.

The bonus issue follows the dismal opening of Reliance Power at the stock exchanges. The scrip, after listing at Rs 547.8, slid within a minute and closed at Rs 372.5, a level much below the issue price.

Reliance Power scrip closed at Rs 416.85, down 1.21 per cent on Friday at the BSE.

On February 20, the company said it had asked its shareholders to make balance payment by February 26 on shares allotted to them in the IPO to be eligible for bonus shares.

Reliance Power's IPO had offered a discount to retail investors, and an option of staggered payment to all segments.

The record date for the bonus shares would be fixed in consultation with stock exchanges and in compliance with provisions of the listing agreement, the firm added.

Reliance Power - bonus ratio to be the key..

Even as legal minds continue to debate the technical issues surrounding Reliance Power’s proposed bonus issue, investors are eagerly awaiting the bonus ratio expected to be announced after the board meet on Sunday.

The Reliance Power board is scheduled to meet on Sunday to consider issue of bonus shares and/or other measures aimed at reducing the cost of acquisition for minority shareholders, who have suffered losses due to the poor performance of the stock since listing.

Since the promoters will not be issued any bonus shares, their stake will automatically be diluted from the current 90%, once the board clears the proposal. Shares of R-Power closed at Rs 417 on BSE, down 1.2% on Friday.

For instance, if the market price on the record date is Rs 400 a share, then the minority shareholders’ cost of acquisition will come down by Rs 42-150 per share, depending on whether the company allow one bonus share for every five held, or one bonus share for every one held. There would have been no gains to any shareholders if the promoters would also have subscribed to the bonus issue.

The calculation is based on the post-bonus dilution in equity capital of R-Power and a pro-rata adjustment in its share price. If the board decides to issue one bonus share for every five shares held by the non-promoters on the record-date, then dilution works out to 2% and there would be a similar decline in the stock price. In comparison, the investor’s acquisition cost will fall by 20%.

In case of a 1:1 bonus, the dilution works to be 10% and the R-Power market price is expected to be adjusted by the similar price while the investor’s acquisition cost will come down by half.

If price falls below Rs 400, the gains will heavily depend on the bonus ratio. For example, if the price on the record date falls to Rs 300 per share, the investors stand to profit only if the company decides to issue at least one share for every two shares held. In the worst case scenario, if the share prices of R-Power plunge to Rs 250 by the record date, then the investors will not make money even if the bonus ratio is a liberal 1:1.

Reliance Power bonus to drive the market

When Reliance Power announced an initial public offering (IPO), it got attention for its size. The hype and marketing blitz that followed stoked public imagination and when the issue opened, it was sold out in seconds.

Contrary to public expectations though, when it listed, the markets hammered the stock down and the company continued to stay in the headlines. Just when the shock was beginning to settle, in an unprecedented move, Reliance Power has proposed to issue bonus shares to stakeholders in the company.

Seemingly a first for any company in the world that is just about a week old on the stock exchange, the company’s board will meet in Mumbai on February 24 to consider the proposal and decide the bonus ratio. The company, however, will not issue any shares to its promoters, a spokesperson for the group said.
Market veterans say group chairman Anil Ambani took it very personally as the stock markets pounded the scrip. Add to this a few million rattled retail investors and the risk of eroding what ‘Brand Ambani ’ stands for in the stock market . All these reasons, analysts said, are compelling the company to come up with a dramatic plan like issuing a bonus to restore confidence.

Once these bonus shares are issued , the cost of acquiring each share will fall to below Rs 430 for retail investors and Rs 450 for institutional and other categories of investors , a company release said. “Several companies have listed at below their offer price and have done nothing to compensate shareholders ... To that extent, this is a trendsetting move,’’ the spokesperson said.

Usually, companies issue bonus shares from their reserves. But in this case, R-Power is a new entity and has no reserves to fall back on. It will have to use its share premium account to issue the bonus. Of the Rs 11,560 crore mobilized through the recent IPO, roughly Rs 11,300 crore is in the share premium account. How much of this will be utilized will depend on the ratio of shares it will issue as bonus.

Market players, although surprised , are divided on what it means. There is a school of thought which argues that this is the promoters’ way of acknowledging they had overpriced the issue, an argument hotly contested by Reliance Power.

SHOCK THERAPY

Largest IPO in Indian history mobilises Rs 11,560 crore. The issue was priced at Rs 430/share for retail investors and Rs 450 for others. When the bids opened on Jan 15, within 60 seconds it was oversubscribed two times.

Funds committed on Day 1 was a staggering $25 billion or about Rs 1 lakh crore. The IPO closed on Jan 18, with book-size of $190 billion or Rs 7.5 lakh crore. It was subscribed 73 times from 50 lakh applications l Listed on the bourses on Feb 11, opens trading at Rs 548.

Within seconds, falls to Rs 430. Stock hammered in first three sessions, with all-time low of Rs 333 and a high of 599. On listing day, the sensex crashes 834 points. Current price Rs 385, Current market cap Rs 87,000 crore and Total investor wealth lost since listing Rs 1,352 crore

REPL bonus proposal, FIIs, global cues to drive market

MUMBAI: A surprise bonus proposal from the recently-listed Reliance Power is sure to propel market sentiment on Monday. While the global cues are not negative, with the US markets closing flat on Friday, market players are expecting foreign funds to return to the Indian bourses soon. The week would also see the build-up of budget expectations, scheduled during the end of the current month, they said.

On Sunday, RelPower, which was listed on the bourses on February 11 following a highly-subscribed IPO, said it was proposing a bonus issue for non-promoter shareholders and its board would consider the proposal on February 24.

Market players believed this is sure to drive the stock on Monday and is expected to bring it closer to its IPO price of Rs 450 per share from its current price of Rs 385 on the BSE. This particular move coincides with the scheduled opening of the IPO for Rural Electrification Corporation on Tuesday.

On the global markets front, cues are not negative. On Friday, the US markets closed flat and Monday being a holiday there, speculators here could use the extra day to push up shares prices on Monday.

Last week, after two consecutive sessions of fall, the sensex had made a strong recovery in the next three sessions to end 650 points higher on a weekly basis as fears of a severe economic slowdown receded. This, market players believe could bring back the foreign fund managers who have so far this year have mostly been on the selling side.

Institutional dealers and top broking house officials believe unless foreign institutional investors (FIIs) come back to the market, it would be difficult for domestic institutions and retail investors to take the market higher.

Reliance Power Bonus !

In an unprecedented move, Anil Ambani Group company Reliance Power will give free bonus shares to all its shareholders to compensate the losses they suffered when the company was listed a week ago.

"Reliance Power board will consider issuing free bonus shares to all shareholders excluding the promoters," a group spokesperson said.

On the day of its listing at Rs 547.8 a share, Reliance Power performed miserably at the stock exchanges and closed the day nearly 32 per cent lower.

The IPO had attracted a total demand of about Rs 7,50,000 crore and the company had issued the shares at Rs 450 while giving a discount Rs 20 a share to retail investors.

Via ET

PSU Bonus

The government reportedly plans to ask blue-chip public sector units (PSUs) including NTPC, Bharat Electricals, Steel Authority of India, ONGC, Indian Oil Corporation, BPCL, HPCL and Gail to issue bonus shares, as their reserves and surplus have increased to several times their paid-up capital. The Prime Minister’s Office (PMO) may issue a directive to PSUs having paid-up capital over Rs 100 crore to consider issuance of bonus shares, the report added.

Madras high court has reportedly suspended an interim order restraining TVS Motor Company from booking or selling its recently launched 125-cc bike 'Flame'. The bench posted the case to 4 January and 5 January 2008, for further hearing of all the petitions.

Apollo Tyres is reportedly close to acquiring a south east Asian tyre maker. The acquisition would be finalised early next year. The target firm or likely deal value were not disclosed.

DLF has REPORTEDLY received regulatory approval to launch the initial public offer of DLF Offices Trust in Singapore for raising about $1.5 billion. The IPO of DLF Offices Trust, a Real Estate Investment Trust (REIT) of K P Singh-promoted DLF Assets, is expected to come in January next year, the reports added.

IFCI has reportedly invited bids from merchant bankers to value and buy its shares in 100 unlisted firms to enable the company to sell them.

Anil Dhirubhai Ambani promoted Zapak.com, an online gaming portal, is all set to acquire Sony Online Entertainment (SOE) for around $300 million (Rs 1,200 crore). The deal, which has been brewing for the past two weeks or so, will be finalized in the next few days. Possibly by next week, Zapak will have full rights to all content owned and published by SOE, the reports added.

Bharti Enterprises may reportedly acquire Big Apple, the Delhi-based supermarket chain with 65 stores.

Anil Dhirubhai Ambani (ADA) group is on course to dilute 5% stake in the privately held Reliance Entertainment, the holding company for the group's entire entertainment business. The stake sale is planned to be a purely financial one, to a clutch of institutional investors, and not to strategic partners like any global major in the entertainment or movie business, the reports suggest.

Wipro is reportedly expected to place a bid to acquire French consulting firm Capgemini by January-end next year, according to investment banking sources. The bid could be close to Euro 48 per share, valuing Capgemini at $6.4-7 billion.

MRF reportedly expects to get possession of 500 acres at Tamil Nadu, by next month where it plans to invest Rs 1,000 crore to set up a new facility.

Q&A

It is observed that when a company declares bonus shares, the stock price falls by 50 per cent or more on ex-bonus date from the last trading and then starts rising.

In this backdrop, is it advisable to enter Sundaram Fasteners and Dabur at current price levels? I have a one-two year perspective.

When a company declares a bonus, the stock price declines on the ex-date to adjust for the expanded equity base, based on the bonus ratio. The reason that the share price of a company often rallies after it goes ex-bonus is due to the way in which bonus offers alter investor perception about the company.

The fundamentals of the companies issuing bonus shares are perceived as being very sound. Secondly, investors apply linear thinking and expect the company's management to reward the shareholders with more bonus issues in future as well.

This results in the share prices moving up after the share price goes ex-bonus.

Though share prices often move up when they go ex-bonus, it is not a rule that is carved in stone. Depending on the market conditions and the factors influencing the sector in which the company operates, the prices can move lower too.

Take the example of Bajaj Auto that had declared a 1:2 bonus in 1997. The stock price fell 57 per cent in the four years succeeding the issue. Similarly, shares of Tata Chemicals lost 84 per cent in the five years after the shares went ex-bonus in 1995.

On your stock specific queries, Sundaram Fasteners has halted its short-term down move at Rs 73. This is 50 per cent retracement from the high of Rs 94. This seems like a good point to buy this stock with a stop at Rs 70. Price targets would be Rs 128 and then Rs 178.

The Dabur India stock is reversing direction after hitting a high of Rs 117. The stock price is hovering around Rs 100, where the 50-day moving average is positioned.

A slide below these levels can take the price to the next support band that exists between Rs 90 and Rs 95. You can buy the share with a stop at Rs 88. If there is a dip below Rs 90, the price can slip all the way to Rs 73.

I have a demat account with a private bank, which allows online transactions. But due to non-availability of Internet connection I am unable to execute my transactions online.

So, now I want to open an account with a local broker. Please tell me whether it is possible to open more than one demat account, or some other way to do this.

Most online brokers have the facility for placing orders through the telephone as well. You can check with your online broker if you can place your orders though the telephone line.

Even if you decide to change your broker, there is no need for you to open a new demat account. The demat account that you were accessing with the online broker can continue to be used with the local broker as well.

SEBI clearly states that the investor need not consider the convenience of his broker while deciding on his demat account.

The laws of our country permit the investor to open more than one demat account with the same depository participant or with different depository participants. You are free to open and operate more than one demat account, if you so desire, provided they are not in fictitious names.