Anil adds 3:5 Power to shares

In an attempt to compensate investors for the poor listing of its shares, Reliance Power on Sunday proposed an issue of free bonus shares to all investors, excluding the promoters, in the ratio of 3:5 (three shares for every five held).

The company?s board approved the bonus ratio on Sunday. This apart, the promoter and chairman of the company, Anil Dhirubhai Ambani, announced a voluntary contribution of 2.6% of his personal shareholding in Reliance Power to Reliance Energy Ltd (REL) to protect the company (REL) from any dilution of its 45% stake in Reliance Power.

Ambani said subsequently his shareholding in Reliance Power will decline by 5% to 40%, representing a contribution of nearly Rs 5,000 crore in favour of 60 lakh REL and Reliance Power investors. The boards of REL and Reliance Power approved the proposals on Sunday. The company had announced the bonus issue plan on February 17.

The company said the record date for the bonus issue will be fixed once approvals from shareholders?through postal ballot?and stock exchanges come in. The record date will decide who qualifies for the bonus shares. The shareholders who hold the shares in their name on the record date will be eligible to receive the bonus shares.

After the three-hour board meetings of Reliance Power and REL, Ambani, addressing a jam-packed press conference in Mumbai, said, ?I have been concerned by the notional losses arising to millions of long-term investors in Reliance Power, as a result of uncertain global and domestic capital markets, subsequent to the pricing of our IPO. We have taken this one-time and unprecedented measure in demonstration of our philosophy of endeavouring to protect and enhance value for our long-term shareholders.?

The bonus offering, the company said, will bring down the cost of shares below the IPO price. It will cost Rs 269 per share for retail investors, that is 40% lower than the IPO price of Rs 430. Similarly, it will cost Rs 281 per share for institutional investors, that is 37% lower than the IPO price of Rs 450 for institutional investors.