The Hindu : Business : Reliance Power closes at discount

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Tuesday, Feb 12, 2008
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Reliance Power closes at discount

Oommen A. Ninan

The shares list on BSE and NSE

MUMBAI: In a most disappointing day for the stock markets, the much hyped initial public offering (IPO) of Reliance Power (REPL) witnessed a lacklustre listing on Monday as its price fell below its offer price of Rs. 430-450. Along with the fall of REPL shares, other stocks too crumbled, led by power stocks, and the BSE benchmark index crashed by 833.98 points or 4.78 per cent. REPL closed at Rs. 372.50.

The country’s biggest IPO received an overwhelming response. At the closure of the issue, in a post-issue press conference few days back, an enthusiastic Chairman of the company, Anil D. Ambani, had said that “Record subscription achieved in the midst of global and domestic meltdown in stock markets during the week,” when Reliance Power IPO was on.

He also had said that this was the largest subscription in an IPO in the history of the global capital markets: record participation from 50 lakh retail investors; largest number of applications in any IPO in the world; record qualified institutional buyers (QIBs) participation at over Rs. 500,000 crore; and wide participation from nearly 500 domestic and international QIBs.

However, all fell flat on Monday. This was an issue which saw the opening of many new demat accounts (which is necessary to buy equities) as retail investors borrowed heavily from banks to invest in this particular IPO. Many expert analysts too failed to predict Monday’s situation.

Crisil, the leading rating agency, assigned a grade of four on five to this IPO. This grade indicated that the fundamentals of the issue are above average, in relation to other listed equity securities in India. Interest cost on borrowed funds together the loss made on the listing would wash out all dreams.

Monday’s fall again raises questions on listing prices. After seeing a boom in the IPO market throughout 2007 and at the beginning of the current year, many issuers are getting scared to enter the market in the current situation. Wockhardt Hospitals and Emaar MGF withdrew their public offering of shares last week.

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