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Sun, 24th Feb 2008  Reliance Power Ltd on Sunday set a 3-for-5 bonus share issue in an attempt to cheer shareholders after a miserable debut following a record $3 billion initial public offer.
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.
For institutions, the bonus issue would cut the price to 281 rupees a share compared to an IPO price of 450 rupees.
Chairman Anil Ambani on Sunday said he was also giving up 2.6 percent of his shareholding in Reliance Power to Reliance Energy Ltd, which owns about 45 percent in Reliance Power, so its ownership structure remains intact.
A proposed IPO for another group company was on track subject to market conditions, he said.
"We've seen very turbulent conditions in the global and Indian capital markets," he said at a news conference.
"The Reliance Power IPO closed at a time when the market was close to an all-time high. But clearly, since then there has been turbulence in the markets," he said.
"After considering these adverse changes, we have decided on a bonus issue to protect the interests of long-term investors."
The Reliance Power offer was fully subscribed within a minute of its opening and had attracted bids worth $190 billion from over 4 million investors in January, just days before stock markets worldwide went into a tailspin.
India's benchmark 30-share BSE index is down 18 percent from a record high of 21,206.77 hit on Jan. 10.
Shares in Reliance Power dived 17 percent on their trading debut on Feb. 11.
News that the company would consider bonus shares or other measures had lifted sentiment last week. But at Friday's close they were still more than 7 percent below the IPO price.
The slump in Reliance Power, a unit of the Anil Dhirubhai Ambani group, had irked investors who complained they were lured to invest by promises from the firm, which has no operating power plants and is unlikely to report strong profits for five years.
The company has reminded investors that there were risks attached to equity investments, and has said its shares were hit by weak market sentiment. It also blamed unidentified rivals.
The turbulent market has recently forced three firms to shelve their IPOs, including a $1.6 billion issue from Emaar MGF Land, the Indian unit of Dubai's Emaar Properties.
But sentiment appears to be perking up again.
An IPO for state-run Rural Electrification Corp was fully subscribed within the first hour of its opening last week, and is expected to be priced at the upper end of its price range to raise up to 16.4 billion rupees ($409 million).
ADAG's mobile services firm Reliance Communications is awaiting regulatory clearance for an IPO for its telecom towers unit, Reliance Infratel, which may raise $1-$1.5 billion.
Ambani said on Sunday the IPO was on track.
"We are awaiting SEBI (market regulator Securities and Exchange Board of India) approval and will go ahead, depending on market conditions," he said.
"There is no re-think on it."  | 
