The Hindu Business Line : HNI flippers did not flop

Kolkata, Feb.11 High net-worth investors (HNIs) do not seem to be bothered by Reliance Power’s listing at a discount as most of them got very little allotment compared to the amount they subscribed for.

A random survey among this community across four metropolitan cities suggests that many of the long-term HNIs did not apply for or withdrew their subscriptions at the last moment because they did not agree with the “overpricing.”

Some of the HNIs, who took a short-term bet of flipping over on the listing, did not flop because their actual losses were limited. According a Kolkata-based HNI investor, who had applied for 8 lakh Reliance Power shares in the name of the wealth management company he owns and obtained only 5,000 shares (at Rs 450 each), today sold it off at Rs 448 within a few minutes of session’s opening.

“The borrowing cost per share was Rs 135. So the total loss per share was Rs 137”, he said without regret. “The short –term leveraged strategy did not work this time. That’s about it.”

Mr Sunil Luthria, a Mumbai-based professional investor with over two decades of experience, said that he did not apply as he thought it did not make sense even for some one with a long-term view at the offered price range. Some of his HNI friends with a long-term view also ignored the issue. “Long-term investment strategy does not go hand in hand with a tactic of wiping out listing gains.”

Mr Rajesh Sarda, another HNI, said though initially he plumped for it and applied for some shares, later chose to withdraw, as he found it might be imprudent considering a turn in the market condition.

“In a raging bull market, aggressive valuations sail through unquestioned. In this case, it was not so much the valuation per se, but the doubts about long-term earnings potential in relation to the price.”

A Delhi-based HNI, who did not want to be identified, said that an HNI would not turn low net worth after suffering this notional loss. “I have got a few hundred stocks and will continued to hold it, at least as of now.”

Mr Luthria, however, felt that the mutual funds and domestic institutional investors, some of which reportedly sold off the Reliance Power stock today, were unfortunately might have proved themselves equal to the short-terms flippers.

A long-term investor from Bangalore pointed out that ironically, relatively cheaper power stocks turned even more lucrative today as their prices dipped in the rub-off effect.

Refund delayed

Some of the applicants in the retail segment complained to Business Line that they did not get refund even today.

A few Chennai-based subscribers to the Reliance Power issue said that their bank account have not been credited on Monday.

One investor from Kolkata got refund on February 7, even though a company official communicated to him in writing that money has been transferred to his account on February 2.

According to a large brokerage, on February 7, there were a few hundred of its clients in Mumbai who did not got the money back, but on Monday the figure has come down significantly.

As on Friday, January 18, the final bidding status in Reliance power was: QIBs: 82.62 times; non-institutional investors: 190.02 times; Retail: 14.87 times; and overall: 73.04 times.

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