Ratio of 1:1
If the company proposes to issue bonus in ratio of 1 : 1, and as stated above, share price may go upto Rs.500 per share. On ex-bonus basis, share price would correct to Rs.250 per share. This would increase the company’s equity capital from 226 crore shares to 248.80 crore shares, resulting into a market capitalization of Rs.62,000 crore, on post bonus, at Rs.250 per share. The present market capitalization of the company is Rs.92,600 crore at Rs.410 per share while it was at Rs.87,000 crore, at Rs.385 per share, at which it closed before bonus announcement. So, management would not be too keen to go for this ratio.
If the company proposes to issue bonus in ratio of 1 : 1, and as stated above, share price may go upto Rs.500 per share. On ex-bonus basis, share price would correct to Rs.250 per share. This would increase the company’s equity capital from 226 crore shares to 248.80 crore shares, resulting into a market capitalization of Rs.62,000 crore, on post bonus, at Rs.250 per share. The present market capitalization of the company is Rs.92,600 crore at Rs.410 per share while it was at Rs.87,000 crore, at Rs.385 per share, at which it closed before bonus announcement. So, management would not be too keen to go for this ratio.
Ratio of 1:3
If ratio proposed is 1 bonus share for every 3, this would be definitely below market expectation, and can see share price sliding below Rs.400, which would defeat the basic purpose and objective of the management, for which management may not take risk and chance. Even if it is presumed that it is accepted by the market and share price remains at this level, shareholders would not get compensated. Prospects of share price crossing Rs.450, is remote with this ratio.
Ratio of 1:2
If ratio of 1 bonus share for every 2 share is proposed, share price has chances of moving to Rs.450, which would result in share price ruling at Rs.300, on ex-bonus basis. In this situation, the objective of bonus issue shall get achieved and market capitalization of the company would also be at Rs.71,000 crore as post bonus equity of the company, would rise to 237.40 crore equity shares.
Those shareholders, holding shares of RPL on record date, would be the only one’s eligible to receive bonus share and record date is not likely to be on or before 31st March, 2008. So, original investors of IPO, having sold and booked losses, will not be able to make good their losses or stand to gain from the proposed bonus issue.
Also we wish that no legal hurdles comes in the way of this bonus, as it is issued only to non-promoter category, inspite of the entire share capital of RPL being pari – passu. Since, Reliance Energy (REL), a listed company of the group is also a promoter, presently holding about 45% stake, any shareholder of REL can challenge this move of excluding promoters from bonus entitlement, inspite of all shares being pari – passu.
Under any situation, share price would not cross Rs.500 and may not fall below Rs.400, per share, on cum-bonus basis.
Source: sptulsian.com
