Reliance Power dangles 3:5 bonus issue for its investors

When Reliance Power Ltd failed to swing the mood of the markets on the day of its listing, investors felt let down by the hype generated...

When Reliance Power Ltd failed to swing the mood of the markets on the day of its listing, investors felt let down by the hype generated around the biggest initial public offering (IPO) in Indian history. Compensating shareholders for the fall in its share price after listing, the company today proposed an issue of free bonus shares to the investors, excluding the promoters, in the ratio of 3:5 (3 shares for every 5 shares held).

The proposed bonus offer will result in reduction of the cost of the shares below the IPO price. It will cost Rs 269 per share for retail investors, 40 per cent lower than the IPO price of Rs 430, and Rs 281 per share for institutional investors, 37 per cent lower than the IPO price of Rs 450.

Commenting on the move, Reliance-ADAG chairman Anil Ambani said, “I have been concerned by the notional losses arising to millions of long-term investors in Reliance Power, as a result of the uncertain global and domestic capital markets, subsequent to the pricing of our IPO. We have taken this one time unprecedented step today in demonstration of our philosophy of endeavouring to protect and enhance value for our long-term shareholders.”

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Anil Ambani has also announced a voluntary contribution of 2.6 per cent of his personal shareholding in Reliance Power to Reliance Energy Ltd (REL) in order to protect the company from any dilution of its existing 45 per cent stake in Reliance Power. The boards of REL and Reliance Power gave the approval for this today.

The company had come up with the announcement of issuance of bonus shares on February 17 in the wake of the continued plunge in its share price. The process will be completed after receiving the consent of shareholders and stock exchanges.

Further, Ambani said his shareholding in Reliance Power would be reduced by 5 percentage points to 40 per cent from 45 per cent, representing a contribution of nearly Rs 5,000 crore in favour of 6 million investors of REL and Reliance Power. With today’s move, REL will continue to hold 45 per cent in Reliance Power while the public holding will increase to 15 per cent from 10 per cent.

Based on the proposal of issuance of bonus shares, the paid up share capital of the company will increase to 239.7 crore equity shares of Rs 10 each. The company last traded at the National Stock Exchange (NSE) at Rs 417.15 on Friday.

CHANGING STAKES

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• Cost per share for retail investors to decline to Rs 269

• Anil Ambani’s stake to fall from 45% to 40%

• Reliance Energy stake in RPower to remain at 45%

• Anil Ambani to transfer 2.6% of personal stake to REL

• Public holding to rise from 10% to 15%