Bonus talk boosts Reliance Power

Mumbai: Reliance Power Ltd, the company that raised $3 billion last month in India's biggest initial share sale, rose as much as 12 per cent on Monday after saying it will compensate investors for the slump in the stock price following last week's listing.

Reliance Power, controlled by billionaire Anil Ambani, has traded below the maximum IPO sale price of Rs450 apiece since listing on February 11.

Investors will be given free shares as a "one-time" measure to protect them "even from notional short-term losses", the Mumbai-based company said in an e- mailed statement.

"This is probably the first time an Indian company has attempted to save face in the stock market by issuing bonus shares," said Girish Solanki, an analyst at Angel Broking Ltd. in Mumbai, who has a "neutral" rating on the stock. "It's positive and may also help other Ambani stocks."

Investors, who sought $189 billion worth of Reliance Power shares, saw the value of their shares drop as much as 21 per cent on the day of listing as a global equities sell-off dried up appetite for new shares. The rout prompted Indian firms to scrap $1.8 billion of initial share sales.

Reliance Power added Rs28.95, or 7.5 per cent, to Rs413.65 at the Bombay Stock Exchange close yesterday, 8.1 per cent lower than the offer price of Rs450 and 3.8 per cent less than the Rs430 sale price for small investors.

The move to give free shares will be considered by the board of directors on February 24. "The proposal will result in dilution of the promoter group's shareholding in Reliance Power, which they have indicated they will accept in the broader interest of protecting and enhancing value for over four million institutional and retail investors," Reliance Power said.

Demand: Appeal for Sebi probe

Reliance Power has sought an enquiry by the Securities and Exchange Board of India (Sebi), the capital market regulator, into the drop in its shares.

"The decline in the Reliance Power stock price has been compounded by a vicious and orchestrated campaign of market manipulation and market abuse unleashed by unscrupulous rival corporate interests to hammer down all Reliance ADA group stocks," the company said.