Reliance Power Ltd (RPL) plans to issue bonus shares to all equity holders other than the founders, hoping to cheer retail investors after the firm’s shares tumbled following a record $3 billion (Rs11,910 crore) initial public offering (IPO). RPL’s board is scheduled to meet on 24 February to consider issuing bonus shares and/or other measures, which the company said would effectively reduce the cost of the company’s shares.
“This will include a proposal for issuing free bonus shares to all categories of shareholders excluding the promoter group, thereby protecting investors from even short-term losses on their shareholdings,” RPL said.
Reliance Power’s shares, which listed on the stock exchange on 11 February, had fallen by a quarter but recovered to close 15% below the IPO price of Rs450 a share on Friday, helped by a three-day market rally which saw the benchmark index climb 9%.
The slump in Reliance Power, a unit of the Anil Dhirubhai Ambani Group, infuriated investors, many of whom complained they were lured to invest in the company because of promises from the firm, which has no operating power plants and is unlikely to report strong profits for five years.
Reliance’s supporters say the Ambani family has a strong track record of executing projects on schedule and delivering strong returns to investors, attracting millions of investors to bid for its shares offered in India’s biggest IPO.
The company said its shares were hit by weak market sentiment and blamed rivals, who were not identified, for hammering shares of companies in the Anil Dhirubhai Ambani Group. The company also reminded investors that there were risks attached to equity investments.
“Equity shares, by their very nature, are risk-bearing instruments and there is no obligation on behalf of any issuer to insure investors against possible losses,” the company said.
However, the company’s board would consider a bonus issue and other steps as the group had a “fundamental and overriding philosophy of creating value for genuine long- term investors.”
The fall in Reliance Power’s shares followed market turbulence that knocked out a few IPOs, including the $1.6 billion issue from Emaar MGF Land Ltd, the Indian unit of Dubai’s Emaar Properties PJSC.
Reliance Communications Ltd, another Anil Ambani firm, is planning an IPO for its telecom towers unit, Reliance Infratel Ltd, which media reports and bankers say hopes to raise $1-1.5 billion. Founded by Dhirubhai Ambani, the Reliance companies were divided between the late Ambani’s sons in 2005. Anil has interests in telecoms, financials, media and power, while elder brother Mukesh Ambani controls India’s top listed firm, Reliance Industries Ltd.