Reliance Power to decide on bonus shares on Feb 24 (lead:Reliance power)

Mumbai, Feb 18 : The Board of Directors of the Reliance Power Limited is scheduled to meet on February 24 to consider issuing 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 dollars Initial Public Offering (IPO).

The Board would also consider other measures, besides issuing bonus shares, which it 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.

Reliance Power's shares, which listed on the stock exchange on February 11, had fallen by a quarter but recovered to close 15 per cent below the IPO price of 450 rupees a share on Friday, helped by a three-day market rally which saw the benchmark index climb 9 per cent.

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.

J. P. Chalsani, Executive Director of Reliance Energy, however, denied it was a face saving step saying the proposal aimed at reaffirming the company's bond with its investors.

"There are a number of IPOs both from global and Indian markets which are listed at a price and trade, no one took this step. This is the first unique step on this. So, the only one reason why its being done is to reaffirm our connection with our investors, our long time investors on this," Chalsani said.

"We have that bond, we have the mutual confidence in each other. So, where there is market turmoil on this, so this is a step the company is proposing to take to say that yes we are with you. When you are with us you give confidence, we are with you in case of the market turmoil, that is it, nothing at all just to reaffirm our bond with our investors," he added.

Reliance Power, which raised 3 billion dollars in the world's largest IPO this year, attracted bids worth 190 billion dollars from over 4 million investors when it opened for subscription in January, just days before stock markets worldwide went into a tailspin.

Shares in Reliance Power later tanked shortly after they were listed.

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 ever.

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 Anilhirubhai Ambani Group.

It 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," it said.

However, the company's board would consider a bonus issue and other steps as the group had a "fundamental and over-riding 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 1.6 billion dollars issue from Emaar MGF Land, the Indian unit of Dubai's Emaar Properties EMAR.DU.

Reliance Communications, another Anil Ambani firm, is planning an IPO for its telecom towers unit, Reliance Infratel Ltd, which media reports and bankers say aims to raise 1-1.5 billion dollars.

Founded by Dhirubhai Ambani, the Reliance companies were divided between the late Ambani's sons in 2005. Anil has interests in telecom, finance, media and power while elder brother Mukesh controls country's top listed firm, oil and petrochemicals giant Reliance Industries.

ANI