Reliance Power Ltd has convened a meeting of its board of directors on 24 February 2008 to approve its proposal to issue free bonus shares to shareholders barring the promoter group (Reliance Energy Ltd. and the ADA Group) as a one-time measure, and any other steps to reduce the acquisition cost of the shares to below the IPO price.

The cost of acquiring the shares for retail investors was Rs430 per share and Rs450 for institutional and other categories of investors.

The bonus issue will lead to a dilution of the promoter group's shareholding in Reliance Power.

Though the IPO for the 10 per cent of the equity received bids worth nearly $3 billion within a minute of opening, (See: Reliance Power IPO raises $3 billion within a minute) that valued the company and was subscribed 10.5 times on the first day on expectations of a massive listing price, it fell nearly 17 per cent below the issue price on the first day of its listing.

According to data from the Bombay Stock Exchange and the National Stock Exchange, it opened flat, rose briefly to Rs599.90, and then quickly sank to a low of Rs389, raising questions whether the issue had been overpriced, after all.

Nearly 5 million retail investors and almost 500 institutional investors from across the globe had applied for an allotment for the company's maiden public offer.

"The sheer scale and unprecedented magnitude of the response clearly reflected the pricing of the IPO as being in line with prevailing valuation benchmarks and market sentiments," the company said in a regulatory filing.

The company's statement said, "However, subsequent to the closing of the IPO, the global and Indian equity markets have suffered an extra-ordinary meltdown, with all benchmark indices down 15 per cent- 20 per cent, and leading Indian stocks down by an even greater range of 20 per cent - 40 per cent.

In line with this global trend, the Reliance Power stock price has closed below the IPO price, since listing on February 11, 2008.

From the time of opening of the Reliance Power IPO on January 15, 2008, the Sensex is down 13 per cent, while the Reliance Power stock is down 11 per cent from the IPO price for retail investors, and 15 per cent for other categories of investors.

The statement attributed the poor opening to "a vicious and orchestrated campaign of market manipulation and market abuse unleashed by unscrupulous rival corporate interests to hammer down all Reliance ADA group stocks in an attempt to undermine our fair name and reputation, and cause losses to millions of genuine investors."

The company says it has formally written to SEBI seeking an investigation into its allegations.

The company justifies its decision to make the bonus issue saying though equity sharesare risk-bearing instruments with no obligation on behalf of any issuer to insure investors against possible losses, "in keeping with the Reliance ADA Group's fundamental and over-riding philosophy of creating value for genuine long-term investors, the board of directors of Reliance Power will be meeting as above, to consider appropriate one-time measures which will result in reduction of the cost of Reliance Power shares below the IPO price."

The company says this would protect investors even from notional short-term losses on their shareholdings and has said the promoters have accepted a dilution in "the broader interest of protecting and enhancing value for over 4 million institutional and retail investors," which the company says is the world's largest shareholder group.

Reliance Power has a market capitalisation of around Rs87,000 crore ($22 billion), valuing it at India's 10 most valuable private sector companies. The company says it has a net worth of nearly Rs14,000 crore, making it among the top 5 private sector companies in India on this parameter.