3:5 bonus from Reliance Power; effective price will be Rs 269

Mumbai, Feb. 24 Reliance Power will offer three bonus shares to its investors for every five held in an effort to compensate for the fall of its share price after its high decibel, record-breaking initial public offering last month.

The bonus shares will not be offered to the promoters – Mr Anil Ambani, Chairman of the company, and Reliance Energy (REL) – who hold 45 per cent stake each in Reliance Power.

Mr Ambani is reducing his holding in the company to preserve REL’s shareholding at 45 per cent, to make good the notional loss that REL would suffer on account of the bonus issue.



“I am contributing my personal shareholding of 2.6 per cent in Reliance Power to Reliance Energy,” he said, at a news conference here on Sunday after the boards of the companies approved the free issue of shares.

This contribution and the bonus offer would see Mr Ambani’s stake in Reliance Power diluted by around 5 percentage points to 40 per cent, with him relinquishing around Rs 5,000 crore “in the interest of 6 million shareholders”. The public shareholding will be 15 per cent, up from 10 per cent currently.

“I am personally concerned by the notional losses to millions of investors after change in the global and domestic market sentiment after the IPO,” he said.

The bonus issue will effectively reduce the Reliance Power’s share price by nearly 40 per cent to Rs 269 for retail investors (who paid Rs 430 a share) and by 37 per cent to Rs 281 for institutional investors.

The IPO had attracted Rs 7,50,000 crore worth of bids, raising Rs 11,500 crore for the company. A large number of investors had borrowed funds for the IPO hoping to make a profit from the listing premium. When it listed on February 11 below issue price (and continued to remain below it ever since), investor angst at the company predictably ran high.

The market reaction to this bonus announcement appeared mixed. One long time broker said it would make little difference since after any such issue of shares, the stock price typically goes down and investors may still find they have not gained much. “However, they may be more favourably disposed towards the group, which has lined up more IPOs,” said another broker.

After shareholder approval, the record date for the bonus shares would be communicated through the exchanges, Mr Anil Ambani said.