Reliance Power - In "Name" lies the Power

Dear friends, you must have heard a lot on Reliance power IPO and why not, there is an unprecedented euphoria for this IPO. Ask anybody and the reply will be – “Reliance Power- Yes, I am going to apply for it”. This is called the power of Name or say power of brand Value. You can sell a rock for a price of diamond if it is sold in the name “Reliance” and yes such brands are not created in days. It has taken late Sh. Dhiru Bhai Ambani a life time to create this brand and such is the magic of the brand that a project which is going to be up and running only in 2010 can ask a massive premium and that too with a expectation of it doubling on the listing day. So who says “Naam mein Kya rakha hai ?”

I am not going to write an IPO update sort of thing on reliance power. Why ? because I don’t think anybody would like to read me on whether they should apply for it or not! But I would like to dwelve on some questions that this IPO has raised.


Is Reliance Power going the RPL way?

Yes, the IPO of Reliance Power has something in common with that of Reliance Petroleum apart from fact that both are from “Reliance” stable. Investors have seen what happened to RPL post listing. Reliance Power is similar to RPL since it is not going to generate revenues till 2010. So, what does this convey ? This conveys that once the listing euphoria is over, the scrip will be dependent on news on the progress of its projects to move up or down and will be quite volatile with downward bias. I am not sure if you agree with me or not but Anil Ambani does not stand anywhere near the execution intelligence of big brother Mukesh Ambani and the they way the various projects of Reliance power are lined up, it would be an uphill task for Junior Ambani to withstand the trust of the investors. Let’s hope for the best.


Should One apply for fully paid or partly paid ?

This has been a bit confusing part for the investors. Company has provided two options. Option”A” where the investors can apply for fully paid up share. In this case they have to pay Rs. 430 (as Rs. 20 discount for Retail Investors) per share at the time of application.

Under Option “B” the investors can apply for partly paid shares. In this case they have to pay only 25% of the share price. The company will make a call for the balance amount post listing and the investors have to pay the balance amount at that point of time. In this case the investors will not be able to sell on the listing day since they will have only partly paid shares.

Now there is a catch. The company reserves the right to adjust the refund payable to the investors against the partly paid shares and issue fully paid up shares. In this case these investors would also get fully paid up shares and can sell them on listing.

Now the mathematics is that if the retail portion gets oversubscribed by more than 4 times (which it surely will) the partly paid investors will also be issued fully paid up shares and the refund due on their application will be adjusted towards the balance payment. In that case it would be advisable to apply for partly paid shares. If any friend has any information contrary to this please let us know by leaving a comment.

Reliance Power Website

Check Allotment Status of Reliance Power IPO