M A I N   N E W S

Reliance Power bonus 3/5
Tribune News Service & UNI

Mumbai, February 24
Battered by a price hammering at the bourses, Reliance Power today announced a bonus issue of 3:5 to its investors. Briefing newspersons after the Reliance Power board meeting here today, Reliance Power chairman Anil Ambani said the bonus issue would not apply to promoters Reliance Anil Dhirubhai Ambani Group (ADAG) and Reliance Energy, who together hold 90 per cent.

Ambani said for every five shares held, the retail investor would get three bonus shares. Reliance Energy shareholders would not be affected by the announcement as he would divest 2.5 per cent of his personal holding to the Reliance Energy shareholders. In effect, this would mean that Ambani would be transferring shares worth around Rs 5,000 crore ($1.2 billion) to Reliance Energy shareholders post bonus issue, the price of the share would come down to Rs 269 for retail investors, an erosion of 40 per cent to the original issue price of Rs 430, while for others, the price would be Rs 281, a reduction of 37 per cent from the original price of Rs 450. The average retail investor was allotted 16 shares each and would end up with 25 shares after the bonus issue. The percentage held by the retail investors would increase to 15 per cent from the current 10 per cent and the promoters’ share in the company will go down to 40 per cent from 45 per cent, he added.

Ambani said the board considered various developments post-listing before taking the decision. Under the prevailing conditions, it need not have gone in for a bonus issue. However, it chose to issue the bonus issue to honour the trust of retail investors, who had shown faith on the Reliance ADA group. The group had as many as 1.10 crore-retail investors, with Reliance Power alone having 4.2 million retail investors, a record in the world. Ambani said the company had already lodged a complaint with the SEBI regarding battering the stock had on the listing day when within four minutes the price of the stock crashed from Rs 540 to Rs 380.

Replying to a question, he said the group would go ahead with other IPOs it had planned, including Reliance Infratel, for which the draft read herring prospectus had been filed before the SEBI.

Asked whether the stock had been overvalued, he replied in the negative and cited the confidence the investing public, including 500 global investors and over five million retail investors, had on the company whose IPO garnered Rs 750,000 crore ($190 billion). “Post-issue there had been many turbulent movements in Indian and global capital markets,” he added.