Anil Ambani on Sunday gave up Rs 5,000 crore ($1.2 billion) of his personal wealth to enable Reliance Power shareholders to make up for their losses caused by the dismal listing of this high-profile stock.
To ensure that retail and institutional shareholders of Reliance Power and shareholders of Reliance Energy Ltd do not suffer losses, Ambani has decided to dilute his holding in Reliance Power from 45 per cent to 40 per cent so that others, including 6 million retail shareholders, can be compensated.
The Reliance Power board on Sunday approved giving free shares to all categories of shareholders excluding the promoter group in the ratio of three for every five held. The promoter group includes Reliance Energy (with a 45 per cent stake) and the Anil Dhirubhai Ambani Group (another 45 per cent). Retail and institutional shareholders hold the remaining 10 per cent.
With this, the cost of Reliance Power shares will come down to Rs 269 each for retail investors and Rs 281 each for institutional investors. This translates into a 40 per cent discount from the IPO price of Rs 430 for retail investors and 37 per cent from the IPO price of Rs 450 for institutional investors.
The bonus issue will increase the holding of retail and institutional investors in Reliance Power from the current 10 per cent to 15 per cent, while the holdings of Anil Ambani and the ADA Group will come down from 45 per cent to 40 per cent. Reliance Energy, the parent company, retains its holding at 45 per cent.
Addressing a press conference in Mumbai soon after the board meetings of Reliance Energy and Reliance Power, Anil Ambani said, “In the interests of long-term shareholders, the boards approved the issue of bonus shares, though they had the option of doing nothing as in the last two weeks the number of retail investors in Reliance Power has increased, contrary to any negative perception.”
He said, “This approval is unprecedented in the capital markets, both in India and abroad. The board endorsed my concerns on what happened on the day of listing.”
Ambani said he was concerned by the notional losses arising to millions of long-term investors as a result of the dramatic change in sentiment in global and domestic capital markets following the Reliance Power IPO. “Though equity shares are by their nature risk-bearing instruments, we have taken this unprecedented measure in demonstration of our philosophy of endeavoring to protect and enhance value for our long-term shareholders.”
He also reiterated that vested interests deliberately brought down the listing-day price of the Reliance Power scrip, against which a complaint had been filed with the market regulator. “There is clear evidence of price hammering by seven Mauritius-based institutions that were selling in a falling market, which was strange. Within four minutes of listing the stock came down from Rs 540 to Rs 380. My guess is as good as your guess,” Ambani said when asked who was behind the hammering.
Ambani said the bonus issue would be through postal ballot and the record date would be set by the stock exchange. “Anybody applying by the record date will be eligible for the bouns shares,” he said, adding that the forthcoming IPO of Reliance Infratel would be on schedule.