The Hindu Business Line : Reliance Power goes below issue price on debut

Mumbai, Feb. 11 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This was not unexpected, given the backdrop of the market conditions, where two IPOs recently bombed and had to be withdrawn. “But there is almost a cult following among shareholders when it comes to any Ambani company, and the market could only talk about how much of a let-down it was,” said a leading broker.

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 opened 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 scrip opened at Rs 530 and closed at 372.30, its day’s low at Rs 355.

“The issue was priced according to the euphoric market conditions and since now there is much more sanity in the market, the issue seems a little on the higher side,” Mr S. Muhnot, Managing Director & CEO, IDBI Capital Market Services, said.

“Anytime the price reaches Rs 450, we feel there will be selling pressure and Rs 450 will become a benchmark which will be difficult to cross in the short term,” he said.

There was huge selling pressure even at close of trading if one took into account the sell side of the order book on NSE, at 1.34 crore shares against only 19.35 lakh shares on the buy side.

The scrip also topped the volume charts; on NSE 13.43 crore shares worth Rs 5,601 crore were traded and on BSE 6.38 crore shares worth Rs 2,640 crore were traded.

The market cap of Reliance Power at the close of the day stood at Rs 84,185 crore, down from Rs 1,01,700 crore which the issue price of Rs 450 worked out to.

Still, the company’s market cap stood much ahead of some of the Sensex heavyweights such as HDFC, ITC, Tata Steel, Wipro, and HDFC Bank. This is on account of the current equity share capital of Reliance Power being Rs 2,259.82 crore, much higher than for the other companies.

Disappointment

Their disappointment was palpable, but Reliance ADAG officials said the episode must be seen in the light of current circumstances. “We recognise the investors’ disappointment, we are also disappointed. No issuer likes his IPO listing below issue price,” said a senior official with the company.

“Today we are in an integrated market which has seen a global meltdown. If in the last three weeks, the Indian stock market has fallen 20 per cent, with the leading blue chips down by 20 per cent to 40 per cent, can Reliance Power survive in a vacuum? And we were 17 per cent down.”

On the story doing the rounds that investors have burnt their fingers, he said this too must be seen in proportion. “Today’s total loss is Rs 1,700 crore, 30 per cent on the retail side. The maximum that a retail investor has got is 15 shares, on that the loss is not even Rs 1,000. For anyone investing in equities, Rs 1,000 is not such a large amount.”

If high networth individuals have borrowed funds for the IPO and want to sell on the first day of listing, it is not for the company to keep in mind speculators, he said.

“On our part, we feel there is a long term return from the IPO. We have not intended that investors should sell and get out on the first day.”

Related Stories:
Reliance Power: Investors awaiting D-day
Anxious wait for Reliance Power listing
Reliance Power to list on Feb 11