Reliance Power Bonus Share

Investors in Reliance Power, which staged India's biggest public offering last month, could receive bonus shares to compensate them for sharp falls in its stock price.

The proposed bonus share issue for minority investors is unusual for a publicly listed company.

It appears aimed at restoring trust in the group's holding company, Reliance Anil Dhirubhai Ambani Group, which is controlled by Anil Ambani, the billionaire businessman.

Shares in Reliance Power have plunged 15 per cent from its IPO price of Rs450 since trading began on Monday last week, following a 20 per cent fall in the broader market.

At one point they fell by as much as 25 per cent. The company yesterday alleged that "unscrupulous rival corporate interests" had conducted a "vicious and orchestrated campaign" of market manipulation to undermine its offering.

"Reliance Power has formally written to the Securities and Exchange Board of India seeking an investigation," the group said, without naming the alleged rival interests.

The $3bn IPO received a euphoric response from investors. It sold out within a minute of opening and received bids for 73 times the shares on offer.

Investors were drawn by the opportunity to gain exposure to India's infrastructure sector and by the Reliance name. Mr Ambani is the second son of Dhirubhai Ambani, the late industrialist worshipped by Indian investors for his Midas touch.

"In keeping with the Reliance ADA Group's fundamental and overriding philosophy of creating value for genuine long-term investors," Reliance Power said, the board would next Sunday consider "a proposal for issuing free bonus shares".

It did not reveal how many bonus shares it would issue.

The controlling shareholders, Reliance ADA Group and Reliance Energy, would pay for the move by allowing their interests in Reliance Power to be diluted, the company said.

"It will be something significant and not just 3 or 4 per cent," a person familiar with the proposal said.

Ajay Parmar, head of research at the Mumbai brokerage Emkay, said: "I don't think this has happened any time in market history in India."

Only about 10 per cent of the company was sold to the public, which it blamed on the global and domestic share "meltdown".