Date:12/02/2008 URL: http://www.thehindu.com/2008/02/12/stories/2008021258230300.htm

Andhra Pradesh - Hyderabad

Reliance Power IPO a damp squib

M.L.Melly Maitreyi

While the issue price was Rs. 450, it opened at Rs. 530 but declined soon after closing at Rs.372 on NSE

HYDERABAD: The eagerly-awaited listing of Reliance Power IPO on the stock exchange on Monday turned out to be a disappointment for city-based small investors as it ended the day below its issue price.

Dent

Thousands of retail investors from city like elsewhere subscribed to the Reliance Power IPO hoping to book quick profits.

While the issue price was Rs. 450, it opened at Rs. 530 but declined soon after closing at Rs.372 on National Stock Exchange creating a dent in their net investment.

The Reliance Power listing indeed created a different kind of buzz, of disbelief and disappointment that a Reliance share should close lower than the issue price.

Unthinkable

“This was unthinkable about 20 days ago before the market slide began.

The issue was expected to be listed at Rs.800 to Rs.900,” says a chartered accountant, Bhaskar, who got an allotment of 17 shares as against 225, when he applied.

“The market sentiment was on high when the issue was on offer and since then the market fell by 4,000 points, pulling down the sentiment.”

Withdrawn

Even two big IPOs from reputed companies Wockhardt Hospitals and Emmar MGF were withdrawn last week owing to market uncertainties, he said.

This experience may sober down the IPO market.

New IPOs will be reasonably priced and investors will be more cautious.

Wait-and-watch

Mahidhar, a software engineer says all his friends who invested in the high profile IPO believing in the Reliance growth story and expecting big returns were upset following the unexpected listing price of Reliance IPO.

“It generated lot of negative sentiment and mood is now that of wait-and-watch.”

An investment analyst of a reputed stock brokerage firm however is not surprised at Reliance Power’s less-than-the- issue price-listing. Given the steep market fall of January 21 and 22, several small investors lost money and sentiment was shaken. There were also no buyers.

Investment banks

Moreover, the IPO was priced more than the stocks of companies that were already generating power. It was High Networth Individuals (HNIs) and investment banks who invested heavily and wanted to pare their losses.