Concept Consultants

Reliance Power, whose IPO made history on the Indian stock exchanges in January sent ripples through the market when it closed 17 per cent below allotment price on listing on Monday.
This was not unexpected, given the backdrop of the market conditions, where two IPOs recently bombed and had to be withdrawn. Still it also made history being among the few mega issues in recent times to close below issue price on the first day of trading.
The stock oepned on the BSE with a gain of Rs 97 over the issue price of Rs 450. Within minutes it fell to Rs 389 as investors rushed in to sell, to book “listing gains” , for the rest of the day, the stock traded below Rs. 450 closing the day 17 per cent down, at Rs.372.50. On NSE the script opened at Rs 530 and closed at 372.30 its day,s low at Rs 355.
The script also topped the volume charts; on NSE 13.43 crore shares worth Rs5601 crore were traded on BSE 6.38 crore shares worth Rs 2640 crore were traded.

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Reliance Power is set to make its debut in the stock markets on February 11. The equity shares of the company will be listed on both BSE and NSE. The IPO was the largest to hit the Indian Markets, where the issue was subscribed by about 70 times. The qualified institutional buyers portions was subscribed by 82.5 times; the non-institutional portions was subscribed by 159.6 times and the retail portion by 13.6 times.The issue got an aggregate commitment of over Rs 7,50,000 crore, as against the issue size of Rs 11,560 crore.
The allotment and refund exercise after IPO closed was complete and the company now has about 42 lakh shareholders.

(Source: Business Line dated 5-02-08)

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Some Food for thought:

Whoever I meet is asking me how much will Reliance Power get oversubscribed in retail. Will it be 5 times, 10 times, or 25 times. I am being thrown all sort of figures. Frankly speaking, I have no clue. But one thing is for sure, I believe in the India story and I am sure this IPO is going to surprise me with the oversubscription figures.

But to put things in perspective, I did a simple back of the envelope calculation. This may serve as a guide to all:

The number of applications which can be made can only be less than or equal to the number of active demat accounts in India. So I thought lets find the total number of demat accounts in India.

As per NSDL site: 69 lakh active accounts as on 12-Jan-2008
As per CDSL site: 38 lakh accounts (excluding closed accounts)

So total demat acocunts: 107 lakh.

Now out of these we have to remove the institutional and the HNI demat accounts to get the figure for retail applicants. I could not find the ratio of retail accounts to non-retail accounts anywhere. If anyone has any information on this, please enlighten me.

For the sake of our calculation, I take 3 assumptions: 50%, 40% and 30% of all accounts to be retail accounts.

In case of 50%:
Total retail demat accounts: 53.5 lakh.
Now lets assume that entire India applies and everyone applies for 225 shares (max eligible for retail).

In that scenario, max application can be for 120 crores shares. Total shares available for retail is 6.84 crores. That means max oversubscription for retail possible: around 17.5 times.

In case of 40% retail demat accounts, max application can be for 96 crores shares. So total oversubscription for retail possible: 14 times.

In case of 30% retail demat accounts, max application can be for 72 crores shares. So total oversubscription for retail possible: 10.5 times.

And remember, here we are assuming that ENTIRE RETAIL INDIA applies for the maximum of Rs. 1 lakh worth shares.

Now you take your own call as to how much oversubscription is practically reasonable.

I am estimating a reasonable 5 times oversubscription to a max of 7-8 times in retail category.

Only Friday can tell us how big a history is made in the Indian markets!
Cheers India!

IPO IPO, Oversubscription, Reliance Power

Reliance Power got fully subscribed in the first 60 seconds. A 12000 crore IPO getting subscribed in 60 seconds only shows the strength and the bright future of the Indian markets. The IPO is already oversubscribed 9.4 times with 1 lakh crores collected till 1 PM on day one.

As per our estimates, we expect around 150 times of oversubscription in the HNI category and around 5 times of oversubscription in the retail category. We will keep you updated on the subscription figures. So keep checking this post regularly.

We recommend all Retail investors to go for part payment option. Keeping the expected oversubscription in mind, retail investors may not be required to make any further payment on allotment and should receive fully paid-up shares and should be able to sell on listing day itself. This assumption changes only in case the retail segment of the IPO is oversubscribed less than 4 times and you get an allotment of more than 60 shares.

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A Three – Judge Bench, comprising the Chief justice, Mr. K.G. Balakrishnan, Mr. Justice R.V. Raveendran and Mr. Justice J.M. Panchal, stayed the hearing of a Public Interest Litigation (PIL) Petition filed by a Rajkot – Based NGO on RPL’s launch of its multi crore IPO due this 15th of Jan.

The Supreme Court has given permission for Reliance to go ahead with its launch of the Rs 10000 crore mega IPO on 15th of January. Mr. Harish Salve who appeared for RPL mentioned that the PIL petition before the Bench was motivated and filed to cause harassment to Reliance Power, he also stated that the IPO cannot be reversed as it would affect the capital and stock markets and foreign institutional investors would stop investing in India.

Reliance Power has sought a direction to transfer all the pending litigations to the Bombay High Court since the registered office of the company was situated in Mumbai.

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Reliance Power Limited IPO
Issue opens on:  January 15, 2008
Issue closes on: January 18, 2008
Price Band: Rs. 405 to Rs. 450 per equity share

We recommend all investors to subscribe to this issue for both listing gains as well as long term investment.

IPO IPO, Reliance Power

Reliance Anil Dhirubhai Ambani Group is planning to come out with an IPO of Reliance Power. 

They had filed the draft prospectus for its IPO in the first week of October. The IPO is understood to have secured the approval of SEBI with the condition of a 5 year lock-in clause for the promoters.

It is believed that the promoters are uncomfortable with this clause and that may delay the IPO a bit. Once this is sorted out, the IPO is expected to hit the markets soon.

On Tuesday, January 1, 2008, rating agency ICRA assigned an IPO Grade of 4 out of 5 (above average fundamentals) to the IPO. They came out with a release which said, “The grade assigned reflects the benefits arising out of being a part of the Reliance Anil Dhirubhai Ambani Group which has considerable experience across the value chain in the power sector and the expected cost competitiveness of most of the power projects in relation to the markets it proposes to serve. ”

“Further, the IPO proceeds would enable the company to tie up the equity funding for the first tranche of projects that it has identified.”, said the release.

“The grading assigned to the proposed IPO also takes into consideration the prospects for the power generation business in the country with increasing regulatory clarity, gradual emergence of a market for trading in power and improvement in financial position of some of the utilities in the state sector. “, the release added.

“The grading is, however, constrained by the implementation risks inherent in project implementation of the scale and magnitude being envisaged by the company and uncertainty on issues related to gas.”, the release clarified.

The market is very excited in anticipation of this IPO. It is also expected that retail investors may get a discount on issue price like the ICICI Bank Issue. We expect this IPO to be a good success with huge over-subscriptions.

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