In an unprecedented move, Reliance Power (RPower) Board, on Sunday, approved a proposal for issuing free bonus shares in the ratio of 3:5 to all shareholders excluding the promoter group. Thus shareholders other than the founders will receive three bonus shares for every five held at free of cost.

This free bonus will reduce the cost of acquisition of Reliance Power shares to Rs 269 for retail shareholders and Rs 281 other (institutional) shareholders, lower than 40 per cent and 37 per cent against the original IPO price of Rs 430 and Rs 450 per share respectively.

In a related development, the Board of Reliance Energy Limited, which holds 45 per cent equity stake in Reliance Power, also held a meeting and approved the waiver of right to receive free bonus shares. 

Adverse change

Reliance Anil Dhirubhai Ambani Group Chairman Anil Ambani, who is also the Chairman of REL, simultaneously announced a voluntary contribution of 2.6 per cent of his shareholding in Reliance Power to REL to protect the latter from any dilution of its existing 45 per cent stake in the former, as a result of the bonus proposal.

With this move, REL stake in Reliance Power will still be maintained at the existing level of 45 per cent, while ADAG to 40 per cent and public shareholding to 15 per cent. Addressing a press conference here, Mr Ambani said “I have been personally concerned by the notional losses arising to millions of long term investors in Reliance Power, as a result of a dramatic adverse change in sentiment in global and domestic capital markets, subsequent to the pricing of our IPO.”  Based on the proposal for issuance of bonus shares, the paid up share capital of the company will stand increased to 239.7 crore equity shares of Rs 10 each.

Price-hammering

Replying to a question, Mr Ambani said the reduction of his shareholding in Reliance Power by 5 per cent from 45 to 40 per cent, represents a contribution of about Rs 5,000 crore (US$1.2 billion) by him, in favour of nearly 60 lakh investors in Reliance Energy and Reliance Power.

Responding to a query on the price hammering of his company’s scrip on the listing day, Mr Ambani said “We have made a formal complaint to the market regulator Sebi requesting them to probe the price hammering.” 

He pointed out that it is normal for people to sell shares when the prices are going up, but here selling is happening when the prices are going down, and this should suffice that this was being done deliberately. To a related question, he said:  “We will leave it to Sebi on the price hammering of the scrip.”

Contrary to some market perception, Mr Ambani said during the last two weeks – 10 trading days – the number of retail shareholders of Reliance Power has actually increased and the retail base is “extremely strong” and stands at 2.5 crore shares. Prior to Reliance Power IPO debut, ADAG shareholding stood at 70 lakh and it has now increased to 1.1 crore and Reliance Power, as a solo entity, has a shareholding base of 42 lakh.