Reliance Industries' 1:1 Bonus Issue, Q2 Preview, and Stock Strategy: What You Need to Know

Reliance Industries Overview A 1:1 Bonus Issue Reliance Industries is one of the largest Indian conglomerates and recently made enough noise in the stock market by announcing a 1:1 bonus issue. A bonus issue rewards shareholders by issuing additional shares for every share they already hold, thus doubling the number of free shares in their account at no extra cost on the part of the investors.

A record date of 18 October, 2024, has been announced for the bonus issue. It will mean that the investors holding Reliance shares on or before this date will get entitlement to these bonus shares. Bonus issue does not water down the value held by shareholders, but increases the number of floating shares.

Bonus Issue: Why does it matter to Investors

Actually, bonus issue can be considered a corporate action which exudes confidence positive about the health of its financials. Issuing bonus shares reaffirm Reliance’s focus on the long-term investor. As the post-issue adjustment in terms of the increased number of shares, the market capitalisation as a whole would remain untouched.

Advantages of Bonus Issues

Better Liquidity: More shares hitting the market make the Reliance stock in the market more liquid. That means investors will have an easy time trading-in the shares.
Market Sentiment Boost: Bonus issues are considered positive sentiments toward the prospects for the company’s growth. It means that the company has strong inflow of cash flows and wants to return some of them to the shareholders.

This attracts retail investors because the number of shares increases without affecting the aggregate value and commonly means that the per-share price falls as the stock becomes more accessible to retail investors. Reliance Industries Q2 FY2024 Earnings Preview

Analysts would very closely track what is going to happen in each of the business segments as the Q2 FY2024 earnings are around the corner. Reliance Industries incorporates all such sectors like refining oil, petrochemicals, telecommunications under the brand name Jio, retail, and green energy. Industry reports say that it will be expected to see great performances from the side of finance.

Segments to Watch Out for:

Petrochemicals and Refinery: The core business from the refining and petrochemicals segment has been garnering a significant percentage of revenue. Hike in crude oil prices as demand grows from geographies ensure good Q2 performance from this segment and something to watch about the Gross Refining Margin.

Retail: Reliance Retail is expanding at a pretty rapid clip, and Q2 results might show better consumer spending during the festive season. Reliance has made strategic acquisitions and partnerships to fortify its retail footprint as well.

Telecom (Jio): Reliance Jio is totally leading telecom operator in India. Growth in data consumption and rollout of 5G will see decent growth in telecom revenue for Jio.

Green Energy Initiatives: Reliance has been doing some very interesting work in the renewable energy space, primarily under its New Energy business. Investors would like to know how these green hydrogen and solar initiatives are doing.

Earnings Expectations for Q2

Revenue Growth: Reliances is expected to record strong, double-digit year-on-year growth in revenues led by refining, retail, and the telecom business.

Net Profit: Analysts would expect a net profit rise for Q2 FY2024 as compared to the same period in the previous year. Diversified business models of this company would act like an armoury, in case one of the sectors is volatile.

Stock Strategy: Buy, Hold or Sell Reliance

It is a bonus issue on the anvil with a healthy Q2, therefore most analysts are recommending a buy or hold approach towards Reliance Industries. Here’s why:

Bonus Issue Impact: Companies that have, in the past issued bonus issues, had reported short-term increases in stock price resulting from improving investor sentiment. While the stock price would normally adjust downward to recoup some of the bonus issue discount, this overall improving market sentiment is going to be maintained.

Strong Fundamentals: Reliance has demonstrated sustainable growth as time and again the company provides strong financial performance in diversified businesses. Dominant leadership in refining, retail, and telecom businesses and thrust in green energy only makes it a great long-term investment.

Valuation Attractive: Analysts believe that stock of Reliance is at under-presentation as compared with its prospects. The bonus issue, along with the Q2 earnings report, may fuel the price rally.

Price Targets for Stocks: Many brokerage houses have rated Reliance buy with stock price targets between ₹2,700 and ₹3,200 on a post-bonus issue basis. Upside is quite sizeable at current stock levels and thus an attractive proposition for the investor. Road Ahead: All Growth Drivers in Reliance Industries

The biggest growth drivers in the future will be maintaining the continued expansion of the company into existing business segments and new ones. Areas to watch are discussed below.

5G Rollout: Reliance Jio is going to be one of the most promising players in the 5G market in India now. Along with 5G services rollout, Jio would increase its subscriber addition and get higher Average Revenue Per User (ARPU).

Retail: Online or offline, Reliance Retail is scaling-outlet bases include grocery and fashion retail. So it will be in the vanguard of India’s young retail market.

Green Energy Revolution: Reliance has also got itself aligned with renewable energy through investments in green hydrogen and solar energy projects. This revolution will put it in harmony with global headwinds toward sustainability-a long-term growth driver.

Strategic Acquisitions and Partnerships: Reliance has cemented its market through strategic acquisitions in all its business verticals. These in fact not only aid corporate scales but also in revenue diversifications.

Conclusion:

A Bright Future for Reliance Industries
Reliance Industries stand testimony to many leadership positions in all the businesses it operates like refining, telecom, and retail. A one-to-one bonus issue combined with the confidence of healthy earnings coming out from Q2FY2024 makes it a watchlist stock, especially for those who get that added incentive with the bonus, signifying confidence related to the health of the company.

The diversified portfolio, healthy financials, and rapid growth strategies in renewable energy, telecom, and retail segments make Reliance Industries one of the most attractive investment-worthy stocks available in the Indian stock market. In the long-term perspective, stable investment returns and growth are in store for the investors.

Again, the financial objectives and risk appetite will be due care and attention by the prospective investors before making any investment decision. However, going by the current theme of Reliance and the strategic initiatives it has undertaken, it seems it has all the moving parts in all the right directions.

Disclaimer:

All above recommendations are of the market analysts. Neither the author, nor the brokerage firm, nor Stockstoday.in will be responsible for any loss arising out of any such decision taken based upon this information. All users are cautioned to take their own expert advice prior to making any investment decision.