Reliance Power announces bonus shares issue

Business Materials 25 February 2008 03:23 (UTC +04:00)

( AFP )- India's private sector Reliance Power said Sunday it would issue bonus shares to investors in a move to compensate them for a sharp fall in its stock price two weeks after it was listed.

Reliance Power closed Friday at 416.85 rupees, down 7.36 percent or 33.15 rupees from its issue price of 450 rupees on February 11.

The firm, which raised 2.9 billion dollars in India's biggest-ever initial public offer (IPO), will issue three shares for every five held by Reliance shareholders.

"We've seen very turbulent conditions in the global and Indian capital markets," Reliance Power owner Anil Ambani told reporters. "I have been personally concerned by the notional losses arising to millions of our investors."

The bonus issue will lower the acquisition cost of acquiring Reliance Power shares to 269 rupees for individual investors -- 40 percent lower than the IPO price, Ambani said.

Reliance Power, which says it has the most private investors in the world with more than four million, slumped 17.2 percent on the day of its listing.

Ambani's personal stake in Reliance Power has been divested by five percent to 40 percent to enable Reliance Energy's stake in the Reliance Power subsidiary to be maintained at 45 percent.

" It's critical investor confidence is maintained in Reliance Power," an analyst at Mumbai's Centrum Broking said last week.

"It (Reliance Power) was the group's maiden offering with other group subsidiaries set to raise funds in the future," the analyst said, speaking on condition of anonymity.

Ambani's group company Reliance Infratel, part of India's second biggest telecom firm Reliance Communications, plans to raise up to 1.5 billion dollars in an IPO in coming months. It filed the prospectus earlier this month.

Reliance Power, which had spun off 10 percent of its capital, has written to regulator the Securities and Exchange Board of India (Sebi), saying it wanted an investigation into the price fall.

The firm has accused rivals of seeking to drive down the share.

Investors ordered more than 191 billion dollars worth of stock in the firm's massively oversubscribed share offering -- the most subscriptions in Indian market history.

Anil Ambani is the youngest son of Dhirubhai Ambani, a rags-to-riches entrepreneur who built a petrochemicals empire and was legendary for his money-making talents.

Reliance Power has plans to build a dozen major power plants in a country starved of electricity to fuel its fast-growing economy.