21 January 2008

Reliance Power IPO...What was the hype for???

It is unprecedented, even if you call it plain euphoria. Nowhere in the world has an initial public offer of shares by a new company evoked as much response as the Reliance Power issue that closed on Friday.

To put in perspective,

  • Reliance Power is yet to commence business or show income from operations,
  • investors from across the world placed bids worth $200 billion for its shares worth $2.9 billion on offer.
  • Retail investors have put in 5.1 million applications for shares worth $47 billion or Rs 188,000 crore.( the collections are a fourth of the total direct tax collections for last year. )
  • The IPO was comppletely subscribed from the minute of its opening, as if the shares would come on a first come first serve basis!
  • 10 Lakh new Demat accounts were opened in just five days!!Such was the hype that everybody wanted to be a a millionaire!!
  • Reportedly, Applictions have been sold for 10000 bucks in the gray market!!
  • Gray markets of Gujarat have reportedly started trading the stock at a premium of Rs300-400.
The stock had a max price of 450 with a discount of Rs20 for retail investors, also given an option of partial payment of Rs115/share for a min of 15 shares.Meaning, that most retail investors(RI) have filled applictions for 225 shares worth Rs 25875/- (115*225).

Now that the issue has subscribed to about 15 times for RI, they are expected to be allotted 15 shares,i.e. worth Rs6450,with a refund of Rs.19425. So the question of RIs with partial payment not being able to sell immediately is not applicable anymore.
With an expected premium of Rs300, one is expected to make about Rs4500 out of the deal, not taking into account the opportunity cost.

So, whats' the HYPE for?

what about those who have taken applications for 10000 bucks!!I guess its time for stop cheque payments....

As far as I'm concerned, I'll be queuing up for sale on the listing day too, with lakhs of others, and pocket the five thousand.A 100% return in a month is not that bad actually!!

The other man smiling(read ecstatic) is one Mr.Anil Ambani,who might well trounce BILL GATES to become the richest person in the world on the listing day....if the stock lists at Rs900.




9 comments:

  1. seems like what u wrote about stop cheque payments is already getting true, read this in a article in economic times...
    http://economictimes.indiatimes.com/Reliance_Power_IPO_Banks_face_stop-payment_calls/rssarticleshow/2722576.cms

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  2. yeah prashanth...i also read that article. with the market falling so badly, it looks like the premium is set to reduce.....all the more reason for investors to take their money back.

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  3. When I read the title of this post I thought it is the one covering all aspects of the IPO but one sided approach disappointed me.

    BTW,even I applied for 225 shares. ;)

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  4. yeah..i wrote it when the issue was closed, and was targeted at people who had invested. Just to put things in perspective for the new investor who are largely driven by external hype....

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  5. update:

    Reliance power IPO to be listed on 11th feb.
    Most retail investors would be alloted 16 shares.

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  6. There is reason to believe that Reliance Power IPO's lacklustre listing was a handiwork of vested interests, which targeted someone else but managed to harm the interests of the genuine investors. Instead of giving hope and solace to the worried investors, why was the key financial media 'talking down the market' every morning before market hours so as to ensure a depressed market sentiment right from the very beginning of every trading day during the period? Investors want to know why all Reliance ADAG scrips were drastically hit and hammered even though they belonged to unrelated sectoral groups. Perhaps the role of the rival company should be examined in order to see if there was any collusion between the rival group executives and tainted brokers, who are adept at market manipulation. The investigating agencies can definitely check whether the manipulation was done from India or abroad. Records could give an indication whether rival camp executives, brokers and international bearish market manipulators met abroad in order to rig the downfall of the market.

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  7. hi rashmi,
    As much as you say, Reliance Power has demanded a probe by SEBI into market manipulation and market abuse through a vicious and orchestrated campaign.

    In a first, Anil Ambani has announced to consider free bonus shares for investors in the company.Free shares would be for all the shareholders, excluding promoters.A proposal for this would be considered at the Board meeting of February 24.This is really a huge gesture by Mr. Ambani!!!

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  8. they have only looted money in this IPO

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