Mumbai, Dec. 24: Sterlite Industries today sprung a surprise on its shareholders by announcing a bonus issue in the 1:1 ratio. The bonus issue will precede the rights issue that the company had announced last week.

Sterlite is planning a rights issue to channelise part of the Vedanta proceeds to fund its expansion plans. The issue will be in the ratio of three new shares for every 10 existing shares of the expanded capital. The company proposes to raise at least Rs 1,400 crore.

Sterlite added that a committee of directors would decide on the rights issue price keeping in view the prevailing market price.

The announcement of the rights issue last week had raised eyebrows with observers saying that an rights issue would be the only way by which Vedanta Resources could infuse funds into various group companies. Its past reputation of trying to dismiss small shareholders through a botched plan of equity capital reduction caused some misgivings among minority shareholders on the move.

While observers felt that the rights issue would help the company fund its expansion plans, it was not likely to see heavy participation from retail shareholders as the rights issue is expected be priced very high.

Senior officials of Sterlite were not available for comments. However, analysts feel that coming out with a rights issue after the completion of the bonus issue could be one way of addressing this problem. Promoters who hold more than 66 per cent could also stand to gain from the bonus issue, analysts said.

On the Bombay Stock Exchange today, the Sterlite scrip opened at Rs 1,330, rose to an intra-day high of Rs 1,335 before closing at Rs 1,264.45. The equity capital of the company as on September 30 stands at Rs 17.95 crore.

Vedanta Resources is the holding company of Anil Agarwal’s diversified metals and mining business in India and it will own 55.2 per cent of Sterlite Industries and 80 per cent of Madras Aluminium Company through its wholly-owned subsidiary, Twin Star Holdings Limited.

Senior Sterlite officials have in the past announced their plans to invest Rs 1,800 crore over the next one year to increase zinc and lead production of Hindustan Zinc in which the group has a 65 per cent stake.