Reliance Power offers 3:5 bonus, share cost now Rs269

MUMBAI: Through a two-pronged move on Sunday, Anil Ambani tried to win back the confidence of millions of shareholders.

After an extended three-hour board meeting of Reliance Energy and Reliance Power, Anil announced a dole-out of three free shares for every five held to Reliance Power shareholders.

In a simultaneous move to keep his other half — Reliance Energy — of stakeholders happy, Anil gifted 2.5% of his 45% personal stake in Reliance Power to them.

The move is construed as a bid to avoid the hassle of court cases that may otherwise arise because Reliance Energy and Anil’s investment companies were excluded from the Reliance Power bonus issue.

At a press conference on Sunday, Anil said the Reliance Power issue came at the “high point” in Indian capital markets.

“The board discussed several options on what could we do for our long-term investors, considering the adverse changes in the Indian capital markets,” Anil said.

Combative as ever, he brushed off criticism of Reliance Power being an “expensive issue”.

“The reality is completely different. In 10 trading days over 2.5 crore Reliance Power shares were bought by retail shareholders. That is our bedrock, they have solidly stood by us.”

He recalled that when the IPO was on, he had 50 lakh retail investors and 500 institutional investors giving their thumbs up, and committing Rs7,50,000 crore.

“The board had the option of doing nothing,” he said, stating that the bonus and a personal gift from his individual holding to Reliance Energy were “unprecedented”.

“I’ll personally protect the interests of Reliance Energy shareholders. What I am doing is giving my personal shares free of cost to them.”

He was dispelling fears expressed by analysts of Reliance Energy shareholders losing out if a bonus issue excluded them since the company was also a ‘promoter’.

Anil holds 35% stake in Reliance Energy, but why should the 65% others forego the bonus issue, analysts had asked. The growing dissent, rumoured to be fuelled by vested interests, was nipped in the bud with his stake gift.

Thus, post-bonus, Reliance Energy will continue to hold 45% in Reliance Power, while public shareholding in the new company will rise to 15% from 10% before the bonus.
The loser will be Anil, whose stake in Reliance Power will go down by 5% to 40%, which, if added up in rupees, will mean a gift of Rs5,000 crore.

But is he a loser? After all, the cost price of Reliance Power shares for the promoters was just Rs17, against the IPO price of Rs430 a retail shareholder paid.

The fact remains, however, that the bonus shares effectively reduce the acquisition price for retail shareholders by 40% to Rs269 per share, against the Rs430 they paid at the time of the IPO.

For the institutional investors it reduces the cost by 37% to Rs281 per share, 37% lower than the IPO price of Rs450.