Reliance IPO – reason for all that hype?

Ok. So, here’s a different perspective at the Reliance IPO… Read on. Really interesting.

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.

[Source: Original Post ]


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  1. #1 by JV on January 21, 2008 - 3:33 pm

    I too fail to see any wisdom in investing a company who will be able commission its projects sometime 50-96 months (that is too as per the prospectus). It is difficult to believe that RPEL will be able to generate 28000 mw successfully, when its parent company REL is unable to generate anything after all these years. But investor’s euphoria is at the highest peak , and IPO has been subscribed 72 times blocking some 7.5 lacs crores rupees. The history will repeat itself , as it happened with RPL. Reliance Energy will be soon available in much lower than listing price and perhaps less than the issue price too.

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