The Hindu Business Line : Reliance Power proposes bonus shares to non-promoters

Mumbai, Feb. 17 Reliance Power Ltd, whose shares got listed last week below its offer price after a mega initial public offer (IPO), said on Sunday that it plans to issue bonus shares to all shareholders, except the promoters.

The surprise move is said to be in response to the general feeling among retail investors who felt betrayed as the shares continue to trade below its offer price.

In a statement issued after a board meeting on Sunday, the company said that its board would meet on February 24 to consider a “ proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group (Reliance Energy and ADA Group) and/or other measures, which will result in the reduction of the cost of shares below the IPO price of Rs 430 per share for retail investors and Rs 450 for institutional and other categories of investors.”

The board would decide on the ratio of bonus shares and other details, a company spokesman said.

The promoters, who currently hold 90 per cent equity, would be accepting a dilution of their holding. Post-bonus, the public holding in the company will go up to that extent from the current ten per cent.

This is the first time that an Indian company is issuing bonus shares immediately after its public issue. A section of the market men see this as a move to cheer retail investors who have been complaining that they were lured to invest in the company.

“There has been a blind faith on the part of investors in the Reliance Group. This was shattered after the listing of Reliance Power Now the promoters are going back to the investors to say that they are with them. This is a positive signal to the investors in the Reliance group companies,” said Mr C.J. George of broking firm, Geojit Securities.

The IPO made history in Indian bourses in terms of investor commitments.

But it also made history as being among the few mega issues in the recent times to close below the issue price on the first day of trading.

The fall in Reliance Power shares came alongside a sharp fall in stock markets forcing the withdrawal of at least two major IPOs and reduction in the price bands of several others.

Reliance Power has alleged that a vicious and orchestrated market manipulation is being done to hammer down its shares.

The company has demanded a probe by the capital market regulator, SEBI.