i Develop Stocks Advisory

Ratio holds key to Reliance Power bonus' success Even as legal minds continue to debate the technical issues surrounding Reliance Power’s proposed bonus issue, investors are eagerly awaiting the bonus ratio expected to be announced after the board meet on Sunday. ET worked out some calculations to show that gains to shareholders depend on the company’s market price at the time of announcement and the bonus ratio. Higher the ratio and greater the market price, more are the gains. The Reliance Power board is scheduled to meet on Sunday to consider issue of bonus shares and/or other measures aimed at reducing the cost of acquisition for minority shareholders, who have suffered losses due to the poor performance of the stock since listing. Since the promoters will not be issued any bonus shares, their stake will automatically be diluted from the current 90%, once the board clears the proposal. Shares of R-Power closed at Rs 417 on BSE, down 1.2% on Friday. For instance, if the market price on the record date is Rs 400 a share, then the minority shareholders’ cost of acquisition will come down by Rs 42-150 per share, depending on whether the company allow one bonus share for every five held, or one bonus share for every one held. There would have been no gains to any shareholders if the promoters would also have subscribed to the bonus issue.