RELIANCE POWER : BONUS ISSUE

Dear friends,I have been getting numerous e-mails/queries regarding R-Power, bonus issue etc.

I may say as under :

i) If the company is proposing to issue bonus shares to all existing share holders, then the promoters will also stand to gain. This is not so.

ii) It is widely heard from electronic and print media that so called bonus shares would be issued only to non promoter share holders so that their confidence in ADAG may be maintained.

iii) If (ii) is the case, the company will have to amend the articles of association, for which after the board meeting on 24.2.08, the company would have to call for an EGM with adequate notice. This will entail a time lag of at least 40 days from now on.

iv) Whether the price of 450 was justified or not is another question. Suppose the share had listed at around 800 or so (as was expected), the same people who are now abusing ADAG would have sung praises about him. If you remember, Edelweiss Capital raised money (Rs.10.00 FV shares at about Rs.800). The shares got listed at around 1450 levels and went upto 1680 levels.

v) Even if the share price was ruling at around 550 or 600, the question of so-called bonus would not have arisen. If the so-called bonus question is not raked up by the promoters, the entire investing community would lose faith, not only in this company/ADAG group, but also in many IPOs in general.

vi) At the time of opening of subscription, grey market listing price was expected to be at about 900 and there were reportedly some dealing in places at Ahmedabad, Jaipur etc. around this price. This is unconfirmed. But it is a fact that even now there are several off market operations taking place in many cases.

vii) It is also heard that many people mortgaged their house property, took loans, sold off their gold ornaments etc. to subscribe to this IPO. If greed was not the overriding factor, what was the factor?Therefore friends: there is no point in abusing or blaming any one for any fiasco. We have to blame ourselves. I may disclose that I did not subscribe to this IPO. This is my opinion. My close friends and relatives who sought my advice also refrained from investing. However, quite a few of them made some money after the listing by buying and selling in the secondary market.

Just because one IPO from a leading house bombed on listing, it does not mean that other IPOs are bad. Investors may use their judgement.

KASHIWALA