Reliance Power to consider bonus issue

February 17th, 2008 - 7:35 pm ICT by admin  

New Delhi/Mumbai, Feb 17 (IANS) Barely a week after listing on stock exchanges, Reliance Power Sunday said it would consider a bonus issue to shareholders Feb 24 to address investor complaints of overpricing of its maiden issue. The company said in a statement Sunday that it had informed the stock exchanges that its board of directors will meet Feb 24 to consider a bonus issue to all shareholders, excluding the promoter group.

The company, which belongs to the Reliance Anil Dirubhai Ambani Group, has also written to markets watchdog Securities and Exchange Board of India (SEBI) to probe possible manipulation that led to hammering of its scrip since the debut Feb 11.

“The decline in the Reliance Power stock price has been compounded by a vicious and orchestrated campaign of market manipulation and market abuse,” the company statement said.

“Equity shares, by their very nature, are risk-bearing instruments, and there is no obligation on behalf of any issuer to insure investors against possible losses,” the company said.

Yet the bonus issue will be considered “in keeping with the Reliance ADA Group’s fundamental and overriding philosophy of creating value for genuine long-term investors”, the statement added.

“This will include inter alia consideration of a proposal for issuing free bonus shares to all categories of shareholders, excluding the promoter group, thereby protecting investors even from notional short-term losses,” the company said.

“The proposal will result in dilution of the promoter group’s shareholding in Reliance Power that they have indicated they will accept in the broader interest of protecting and enhancing value for over four million institutional and retail investors.”

Despite drawing record subscriptions, the first day of listing saw the Reliance scrip close at Rs.372 on the opening day Feb 11, with a huge discount over the issue price of Rs.450, after opening at Rs.530.

This had created huge resentment and disappointment among investors, who had overwhelmingly subscribed to the issue, as many of them expected the scrip to debut higher at around Rs.750-850 a share.

The initial public offer had attracted more than five million bids from all categories of domestic and international investors with aggregate commitment of over Rs.7.5 trillion ($189 billion) against the issue size of Rs.115.60 billion ($2.91 billion).

The company currently developing 12 power projects in the country with a total planned installed capacity of 28,000 MW. This is among the largest portfolios of power generation assets under development.

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