Reliance Power IPO raises $3 bn in a minute

Mumbai, January 15: Billionaire Anil Ambani's Reliance Power raised $3 billion within a minute Tuesday when India's biggest initial public offering was fully subscribed as investors flock to new issues in the booming economy.

The issue was covered 10.5 times at the end of the first day of the issue, which closes Friday, National Stock Exchange data showed, and the strong demand means the 10.1 per cent stake in Reliance Power should be sold at Rs.450 ($11.5) per share, the top end of the IPO's price band.

The founders have bought 32 million shares at Rs.450, while 228 million shares have been offered to the public, with a stock market debut pencilled in for early February.

"We haven't seen such oversubscription for a long time. There are expectations of big listing gains. That's why there is a frenzy," said Mehul Mukati, an analyst at Emkay Research.

Reliance Power plans to build power plants across India using funds raised by selling the stake in the firm, which is 50 per cent owned by utility Reliance Energy Ltd.

Reliance Energy shares closed 4.4 per cent lower, lagging a Mumbai market that fell 2.3 per cent. Shares in the firm, a component of the benchmark index, are still up 10.8 per cent in January after more than quadrupling in value last year.

Amid the market frenzy for the IPO, some analysts cautioned it was hard to value Reliance Power, which currently does not have any power plants, faces risks of land disputes and is not likely to report strong profits for four to five years.

"We are unable to accord any definite valuation to the company since it has no operational power assets," Emkay Research said in a note to its clients, recommending them to subscribe to the issue and then book listing gains.

Brokers and analysts say the demand for the stock means it could list at nearly double the offer price, which would value Reliance Power at more than NTPC Ltd., which has 28,000 megawatts of operating plants and another 50,000 megawatts planned in the next 10 years.

Ambani Name

Reliance Power has been helped by investors' faith in the family name as a result of the group of companies set up by Ambani's father, tycoon Dhirubhai Ambani.

Founded in 1958 to trade in synthetic yarn, the group expanded to include interests ranging from petrochemicals and refining to exploration and production of oil and gas, textiles, financial services, power, biotechnology and telecommunications

It was split in 2005 between Anil Ambani, who has interests in telecoms, financials, media and power sectors, and his elder brother Mukesh, who controls India's top listed firm, oil and petrochemicals giant Reliance Industries.

The Reliance Power issue is being managed by Kotak Mahindra Capital Co., UBS ABN AMRO, Deutsche Equities, India Private Limited, Enam Securities, ICICI Securities, JM Financial and JPMorgan.

The Bombay Stock Exchange benchmark index rose 47.1 per cent in 2007. It rose nearly 73 per cent in 2003, 13 per cent in 2004, 42 per cent in 2005 and 46.7 per cent in 2006.

In comparison, South Korea's Composite Stock Price Index gained 32 per cent in 2007, China's Shanghai Composite Index soared 97 per cent and Japan's Nikkei fell 11 per cent.