The announcement sent Reliance Power's shares soaring by 8.38 percent or 32.25 rupees to 416.95 by mid-afternoon but the stock was still down 7.34 percent or 33.05 rupees from its issue price of 450 rupees.
The firm, which raised 2.9 billion dollars in India's biggest-ever initial public offer (IPO), also said it was seeking a regulatory probe into the dive by the shares last week, accusing rivals of seeking to drive down the share.
"We will consider issuing free bonus shares to all shareholders," the company said in a statement to the Mumbai stock exchange. "This would protect investors from even short-term losses on their shareholdings."
Reliance Power, which says it has the most private investors in the world with over four million, slumped 17.2 percent on the day of its listing.
At one point the shares -- whose IPO had received a rave response from investors drawn by the famed Reliance name -- were down 26 percent.
The company's board of directors will meet next Sunday to discuss the bonus issue which analysts said appeared aimed at restoring investor faith in the name of the group's parent Reliance Anil Dhirubhai Ambani (Reliance ADA) Group.
The bonus issue would be in "keeping with the Reliance ADA Group's fundamental and over-riding philosophy to create value for genuine long-term investors" and would be a "one-time measure," the company statement said.
"It's critical investor confidence is maintained in Reliance Power," said an analyst at Mumbai's Centrum Broking, speaking on condition of anonymity.
"It was the group's maiden offering with other group subsidiaries set to raise funds in the future," the analyst said.
Ambani's group company Reliance Infratel, part of India's second biggest telecom firm Reliance Communications, plans to raise up to 1.5 billion dollars in an IPO in coming months and filed the prospectus earlier this month.
Reliance Power, which had spun off 10 percent of its capital, also said it had written to the Securities and Exchange Board of India or Sebi, saying it wanted an investigation into the price fall.
"The decline in the stock has been compounded by a vicious campaign of market manipulation, unleashed by rival corporate interests, to hammer down all Reliance ADA group stocks," the company said in the statement.
It did not name those rivals whom it alleged had undermined the shares or say how many bonus shares it might issue.
Investors ordered more than 191 billion dollars worth of stock in the firm's massively oversubscribed share offering -- the most subscriptions in Indian market history.
Anil Ambani is the youngest son of the Dhirubhai Ambani, a rags-to-riches entrepreneur who built a petrochemicals empire and was legendary for his money-spinning talents.
There was still high optimism at the time of the launch about India's share market expansion following a record number of flotations in 2007.
But since then, the Indian market has fallen sharply amid concern about the outlook for global economy triggered by the US subprime credit crisis.
Ambani has said the "potential of India's power sector remains strong."
Reliance Power has plans to build a dozen major power plants in a country starved of electricity to fuel its fast-growing economy.
Some analysts, however, said the IPO price was too high, considering rivals' much bigger operating capacities.
Source : afp.google.com