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MUKESH Ambani’s Reliance Industries said it will give one bonus share for every share owned in the company for the first time in 12 years in a move intended to instill confidence in investors about the company’s growth prospects.

   Reliance shares, which rose 3% last time when the company declared a bonus in 1997, is expected to gain, traders say. Reliance, listed in 1978, has till date issued bonus shares thrice in its history—in 1980, 1983, and 1997, data show. The company maintained its dividend for the fiscal year ended March 2009 at Rs 13 a share.

   Both the bonus and dividend are applicable to the shareholders of the erstwhile Reliance Petroleum, which has been merged with RIL. Mr Ambani, the company’s chairman and owner of 49% in the company, said the bonus move was intended to reward shareholders for the successful completion of “two world-class projects”. He was referring to the successful commencement of gas production from fields owned by RIL off the east coast of India and the building of a new refinery, which is housed in Reliance Petroleum, at Jamnagar in Gujarat.

   The bonus share issue is also an attempt, some analysts said, to erase a perception among some investors that RIL’s sale of treasury stock recently was an indication that the company thinks the stock price has peaked for now.

   “The negative sentiment created by the treasury stock sale has been nullified by this bonus issue,’’ said Amitabh Chakrobarty of Religare Securities.

   The country’s largest private sector firm last month raised around Rs 3,188 crore through the sale of 1.50 crore of its own equity shares , which were held in Petroleum Trust, controlled by the promoters. These shares had come from the merger of another company, also called Reliance Petroleum, which housed the first 30 million tonne refinery in Jamnagar, with itself.

   In the past, RIL had issued bonus shares when it was confident of earnings growth. Dhirubhai Ambani, the founder of the company who had resisted giving away bonus shares during some years, in 1997 said, “A bonus offer reflects our confidence in the future earnings growth.”

   The company said that it was “ready to invest for the future”, though it didn’t provide details. It said in a written statement that it controlled 25% of the world’s refining capacity and has reached a production of 40 mmscmd of natural gas from the famous KG D-6 fields in Jamnagar.
   The amalgamation of the Reliance Petroleum refining unit with itself and the ramp-up of natural gas production is expected to increase the company’s cash flow, enabling it to service a larger equity base. RIL had a cash flow of Rs 20,950 crore for the year ended March 31, 2009 and its treasury stock holding is valued at Rs 40,000 crore.

   “We had committed to reward our shareholders on successful completion of our two world class projects... the upstream project has been recognised globally as a defining achievement. Our refinery project has made Reliance the operator of the largest refinery site anywhere in the world,” Mr Ambani was quoted as saying in a press statement.

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