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MUMBAI, Dec 28 (Reuters) - India's market regulator said it has disposed of a complaint against a planned initial public offering by Reliance Power Ltd, clearing the way for final approval what could be the country's biggest-ever listing.

Parent Anil Dhirubhai Ambani Group (ADAG) has said the IPO entailed a sale of a 10.1 percent stake in Reliance Power, which media reports have said could raise up to $2.8 billion.

Late on Thursday, the Securities and Exchange Board of India (SEBI) directed ADAG's entire holding in Reliance Power, 20 percent of the capital, be locked-in for five years from the date of allotment, rather than the 18.6 percent proposed by the company.

SEBI also said in a statement it had no jurisdiction to decide or take action on allegations the IPO would affect the interests of shareholders in Reliance Energy Ltd <RLEN.BO>, an ADAG company which owns 50 percent of Reliance Power.

"Now that the allegations have been found to be baseless, we expect SEBI approval for the IPO will take the normal course," a source familiar with the matter said.

A lawsuit filed in the Mumbai High Court by an independent organisation in October had claimed a "serious breach of corporate governance" in the IPO, SEBI said.

The complainant said Reliance Energy shareholders would be adversely affected by the IPO because several major projects had been transferred to Reliance Power from Reliance Energy, SEBI said.

Reliance Power maintained its activities were "in accordance with law", SEBI said.

ADAG, which also has interests in telecom, financial services, infrastructure and entertainment, plans to offer up to 30 percent of the shares to retail clients, with a further 10 percent going to high net worth individuals.

Institutional investors will be offered 60 percent, and may get more if retail demand is weak.

The issue is managed by UBS <UBSN.VX>, ABN AMRO <AAH.AS>, JPMorgan <JPM.N>, Deutsche Bank <DBKGn.DE>, Enam Securities, ICICI Securities, JM Financial <JMSH.BO> and Kotak Mahindra Capital.

Macquarie <MBL.AX> and SBI Capital Markets are co-managers.

Indian firms have raised $8.2 billion from 88 IPOs in 2007, data from Thomson Financial showed, compared with $4.7 billion in 2006, helped by a booming stock market, which is up nearly 47 percent so far this year. (Reporting by Rina Chandran; Additional reporting by Devidutta Tripathy and Virendra Verma; Editing by John Mair and Lincoln Feast) (([email protected]; +91 22 6636 9251; Reuters Messaging: [email protected]))

Keywords: RELIANCEPOWER/IPO