When Anil Ambani decided to issue one-off bonus shares to compensate investors for Reliance Power’s abysmal initial public offering (IPO), the move was seen as an act of generosity. Now it has emerged the Indian billionaire, chairman of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), wants to list more of the conglomerate’s companies. The bonus share looks like an act of enlightened self-interest.
Excitement around India’s biggest IPO was short-lived. Reliance’s domestic reputation as a trusted brand meant that Reliance Power’s $3 billion issue was fully subscribed in less than a minute. Yet, the stock, which nosedived on its February debut, now trades at whopping 27% discount to its issue price and the Reliance name, once tantamount to a sure thing in the stock market, has been tarnished.
Anil Ambani quickly moved to reassure the market that the stock was an attractive long-term investment. Within two weeks of the IPO, Reliance Power’s board approved an issue of three free bonus shares for every five held for all investors except those related to the parent company. The issue, expected in June, appeared to be an act of selfless contrition for the poor market debut.
Yet, it now appears Ambani’s primary aim wasn’t to compensate investors, but rather to protect his own ambitions. R-Adag is eyeing at least two more stock market listings. Reliance Infratel, a telecom tower business, has been lined up to raise $1.5 billion on the Indian market. Meanwhile, Reliance Globalcom is reportedly looking at a London listing that could value it at up to $12 billion.
After Reliance Power’s disastrous debut, Ambani is on a mission to shore up market sentiment around the Reliance brand. Indeed, that might also help explain Reliance Energy’s odd decision back in March to launch a shareholder-friendly share buyback.
Ambani’s enlightened act of self-interest may be understandable, but it won’t guarantee any of Reliance’s future listings a bouncy stock market debut. Only the most naïve of investors can be bought off by the occasional bonus share issue.