Business | Investment
Reliance Power sets bonus share issue
India's Reliance Power Ltd on Sunday set a 3-for-5 bonus share issue in an attempt to cheer shareholders after a miserable debut following a record $3 billion initial public offer.
- Reuters
- Published: 23:29 February 24, 2008
Mumbai: India's Reliance Power Ltd on Sunday set a 3-for-5 bonus share issue in an attempt to cheer shareholders after a miserable debut following a record $3 billion initial public offer.
Shareholders other than the founders will receive three bonus shares for every five held, effectively reducing the cost of the shares to Rs269 for retail shareholders compared to a discounted IPO price of Rs430.
For institutions, the bonus issue would cut the price to Rs281 a share compared to an IPO price of Rs450.
Chairman Anil Ambani said he was also giving up 2.6 per cent of his shareholding in Reliance Power to Reliance Energy Ltd, which owns about 45 per cent in Reliance Power, so its ownership structure remains intact.
A proposed IPO for another group company was on track subject to market conditions, he said.
"We've seen very turbulent conditions in the global and Indian capital markets," he said at a news conference.
"The Reliance Power IPO closed at a time when the market was close to an all-time high. But clearly, since then there has been turbulence in the markets," he said.
Weak sentiment
"After considering these adverse changes, we have decided on a bonus issue to protect the interests of long-term investors."
The Reliance Power offer was fully subscribed within a minute of its opening and had attracted bids worth $190 billion from over four million investors in January, just days before stock markets worldwide went into a tailspin.
India's benchmark 30-share BSE index is down 18 per cent from a record high of 21,206.77 hit on January 10.
Shares in Reliance Power dived 17 per cent on their trading debut on February 11.
News that the company would consider bonus shares or other measures had lifted sentiment last week. But at Friday's close they were still more than seven per cent below the IPO price.
The slump in Reliance Power, a unit of the Anil Dhirubhai Ambani group, had irked investors who complained they were lured to invest by promises from the firm, which has no operating power plants and is unlikely to report strong profits for five years.
The company has reminded investors that there were risks attached to equity investments, and has said its shares were hit by weak market sentiment. It also blamed unidentified rivals.
The turbulent market has recently forced three firms to shelve their IPOs, including a $1.6 billion issue from Emaar MGF Land, the Indian unit of Dubai's Emaar Properties.
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