Reliance Power Bonus Shares: Price Calculations for 5:3 issue

After explaining the mathematics of Bonus issue of Reliance Power shares in my article Truth of Reliance Power issuing Bonus Shares, here are the final and exact numbers and calculations as Anil Ambani has finally declared the exact figures about the Bonus Issue of Reliance Power.
Each Non-Promoter (including Retail Investors, and QIB investors) will receive 3 shares for every 5 shares they hold. Hence, if any retail investor has 15 shares and he is still holding it, then he will receive 9 additional shares as bonus shares, at no extra cost or free of cost.

So what will be the effective price of the retail investors’ shares?
Retail investors were offered shares at 430. Someone receiving 15 shares would have paid 15*430 = 6450 Rs. in total. Now, he will receive 9 more additional shares as bonus, without any extra cost. Therefore, at the same price of 6450, his share holding will increase to 24 shares. Therefore, his effective price will become 6450/24 = 268.75 Rs. only, for each share. Hence, the investors will benefit because the market price of Reliance Power shares is currently trading above 400 Rs.

What about QIB?
The other investors were allotted the shares of Reliance Power at a Price of Rs. 450. Hence, for 15 shares they paid 450 * 15 = 6750. After Bonus Issue of Reliance Power, the no. of shares will increase to 24. Hence, their effective price will become 281.25 Rs per share. Again beneficial, as the stock price of Reliance Power is around 400 Rs.

All in all, it’s a good move by Reliance Power Promoters. Anil Ambani himself have divested his holdings in Reliance Energy and Reliance Power to absorb the losses. I hope this loss bearing by the promoters will give good strength to the share price and benefit to the shareholders. It should also help in marinating the Reliance brand, as a reliable name in India and the world.

Related: Reliance Power Bonus Shares Allotment Date

Another example of Randomness can be observed. The REC or Rural Electrification Corp. IPO was oversubscribed well above its limits.

Hardly 15 days back a well dominated and reliable name of Reliance in the same power sector failed, Emaar MGF and Wockhardt hospitals IPO were cancelled, but an unknown and new company with REC IPO have managed to win the hearts and trust of investors. Keep, watching, things work randomly!

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