Reliance Power Ltd will issue free shares to compensate investors for the slump in the stock price after listing.
The Mumbai-based company will issue 3 shares for every 5, Chairman Anil Ambani said today. The free shares won't be given to Ambani and the founder group, including Reliance Energy Ltd., which hold a combined 90 percent stake.
``I have been personally concerned by the notional losses arising to millions of our investors as a result of a dramatic adverse change in sentiment in global and domestic capital market after the pricing of our IPO,'' Ambani said. ``The board endorsed my concern and approved the bonus issue.''
Shareholders other than the founders will receive three bonus shares for every five held, effectively reducing the cost of the shares to 269 rupees ($7) for retail shareholders compared to a discounted IPO price of 430 rupees.
The bonus issue will reduce the cost of acquiring Reliance Power shares to 269 rupees for individual investors, 40 percent lower than the IPO price. For large shareholders, the rate will fall to 281 rupees a share, Ambani said.
Reliance Power: bonus shares in ratio of 3:5. This issue would benefit over four million investors in the company and the cost would be borne by the promoter group by way of diluting its stake.
Reliance Power has sought an enquiry by the Securities & Exchange Board of India, the market regulator, into ``hammering'' of the stock price, Ambani said.
``Seven Mauritius-based investors went on selling within four minutes of the listing even when the market was falling,'' he said. ``I can understand people selling when the price is going up. There's more than meets the eye.''
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