Reliance Power mulls issuing free bonus shares after sub prime listing

18 February 2008

Reliance Power Ltd has convened a meeting of its board of directors on 24 February 2008 to approve its proposal to issue free bonus shares to shareholders barring the promoter group (Reliance Energy Ltd. and the ADA Group) as a one-time measure, and any other steps to reduce the acquisition cost of the shares to below the IPO price.

The cost of acquiring the shares for retail investors was Rs430 per share and Rs450 for institutional and other categories of investors.

The bonus issue will lead to a dilution of the promoter group's shareholding in Reliance Power.

Though the IPO for the 10 per cent of the equity received bids worth nearly $3 billion within a minute of opening, (See: Reliance Power IPO raises $3 billion within a minute) that valued the company and was subscribed 10.5 times on the first day on expectations of a massive listing price, it fell nearly 17 per cent below the issue price on the first day of its listing.

According to data from the Bombay Stock Exchange and the National Stock Exchange, it opened flat, rose briefly to Rs599.90, and then quickly sank to a low of Rs389, raising questions whether the issue had been overpriced, after all.

Nearly 5 million retail investors and almost 500 institutional investors from across the globe had applied for an allotment for the company's maiden public offer.