Reliance Power is planning to consider bonus issue for its shareholders ( retail as well as institutional ) but except the promoters. This means that the bonus issue will be for non-promoters.
Non-promoter’s holding is about 22.8 crore shares. The public shareholding is about 10.1 %. The market is expecting that the bonus share to be in the ratio of around 1:1 or 1:5 which means that one bonus share for every share or one share for every 5 shares that a person holds. If we take this ratio into consideration, the public stake holding will go up from 10.1 % to anywhere between 11.9 – 18.3 %.
The cost of acquisition of the share may come down. If the ratio is 1:5 then the QIB portion which is subscribed at about Rs. 450, it will come down to about Rs 375 and in case of retail investors, it will come from Rs. 430 to Rs 358.
If the ratio is 1:1, then it will be Rs. 225 for QIBs and Rs 215 for the retail investors. If one takes the scenario where the current share price is held around Rs. 420, then QIB portion will make a profit of about 10 % and the retail investors would make about 15 % , if the ratio is 1:5. But in case if the ratio is 1:1, they will make a huge profit of about 70 % in case of QIBs and about 78 % in case of retail investors.
But would the price be Rs. 420 ? May be not. If one is reminded of last week, many people were talking of Rs 340 or Rs. 350 to be the equilibrium price for the stock. So if one considers that particular thing, the profits for people would boil down to ratio of 1:3. So if the ratio is above 1:3 – either 1:3 or 1:2 or 1:1, then the investors would see profits in their accounts which is the main intention for the company to come ahead with this particular bonus issue.
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