Free On Board.......

The proposed issue of bonus shares has been approved by the Board of Reliance Power and the Company will seek the shareholders approval through a postal ballot shortly. Some of the issues that i had rasied have been addressed. I have discussed below the current status of the issues i had highlighted.

1. Legal framework

I have extracted below the response given by Reliance Power to the stock exchanges in response to some of the questions raised by BSE:

"The proposed Bonus Issue will be made by the Company in accordance with the applicable provisions of the Articles of Association and the Listing Agreement and subject to the approval of Shareholders. The Promoters of the Company have indicated to waive their entitlement for the said bonus shares in accordance with law and in the broader interest of protecting and enhancing value for over 4 million institutional and retail investors of the Company. Accordingly no bonus shares will be issued and allotted to the Promoters."

This issues appears settled though i would want to know what resoultions they would pass, which sections of the Companies Act they would rely on, etc.

2. How will he chose the eligible investors?

I have extracted below the response given by Reliance Power to the stock exchanges in response to some of the questions raised by BSE:

"Bonus Shares will be issued as above to all Members (excluding Promoters) who are identified as Shareholders of the Company on the Record Date, which shall be fixed by the Company in consultation with the Stock Exchanges and in compliance with provisions of the Listing Agreement."

It is clear that the company is yet to decide on the eligible investors list and they would be depend on the record date. Fixing of the record date assumes importance given the discussions in my earlier post.

3. Will the shareholders actually profit or will it be a perception??

This would depend on the listing price post-bonus. We will have to wait and watch!!

4. How will it impact Reliance Energy Limited??

This issue has been addressed and has been addressed well. Anil Ambani proposes to transfer shares free of cost to REL to maintain the 45% shareholding that REL has in Reliance Power. This is a welcome move as far as the shareholder of REL (including me) are concerned.

The most important aspect would be the "Record Date". The "gift" (if it can be called so) of shares by ADAG group companies to REL would open up discussions on a few more tax and legal issues!! This is a space worth watching and i would continue to keep on eye on this.