A Brief Note on Reliance Power


Initial Public Offering (Reg S + 144A)
1,300,000,000 Equity Shares of Rs.2 each through Book Building Route

About the Issuer The Company is part of Reliance ADA group and was established to develop, construct and operate power projects domestically and internationally. The Company is currently developing 12 medium and large sized power projects with a combined planned installed capacity of 24,200 MW, one of the largest portfolios of power generation assets under development in India . The Company intends to sell all the power generated by these projects under a combination of long-term and short-term Power Purchase Agreements to state-owned and private distribution companies and industrial consumers.

The Issue proceeds will be utilized for funding subsidiaries to part-finance the construction and development costs of the various projects under development and for general corporate purposes.

As at September 30, 2007 , the Company had a Total Assets of Rs.20,062.7 million. The restated net profit for FY2007 was Rs.12.7 million

  • Indicative Timing of Issue Issue Opens on: [?], 2008 and Closes on: [?], 2008
  • Indicative Price Band Rs [?] – Rs [?] per share

Book Running Lead Managers Kotak Mahindra Capital Company Limited, UBS Securities India Private Limited, ABN AMRO Securities ( India ) Private Limited, Deutsche Equities India Private Limited, Enam Securities Private Limited, ICICI Securities Limited, JM Financial Consultants Private Limited and J. P. Morgan India Private Limited Co-Book Running Lead ManagersMacquarie India Advisory Services Private Limited and SBI Capital Markets Limited

Indicative Issue Structure: The Net Offer to the public consisting of 1,140,000,000 Equity Shares will be offered to the QIB, Non Institutional and Retail categories in the ratio of minimum 60%, not less than 10% and not less than 30% respectively.

Offering size as % of Capital The Issue will constitute 11.5% of the post issue paid-up capital. The Net Issue to the Public constitutes 10.1% of the post issue paid-up capital with the difference accounted by Promoters Contribution in the Issue of 160,000,000 shares

Strategy & Strengths

  • Capitalizing on the growth of the Indian Power Sector
  • Securing fuel supplies
  • Realizing the opportunities presented by power sector reforms
  • Optimizing operational efficiency
  • Focusing on best practices
  • One of the largest portfolios of power generation projects under development in India
  • A diversified portfolio of power projects
  • Strategically located power projects
  • Reliance ADA group’s experience and position in the Power Sector
  • The Reliance ADA group Brand

Industry Investors view on this stock "Rough calculations show that Reliance Power could fetch a value of around Rs 68,000 crore if the IPO raises around $2.5 billion for a 15% stake. Reliance Energy, which owns 50% in the company, is valued at around Rs 27,549 crore as per Friday’s closing price of Rs 1,205. REL’s 50% stake in Reliance Power alone could be worth more than its current market-cap if the IPO happens at the above-mentioned valuation. "

"This means, Reliance Energy’s holding of 508 crore shares in Reliance Power, post issue, will be valued at Rs 27,432 crore.
Considering Reliance Energy’s diluted equity of 23 crore shares, the value of its holding in Reliance Power works out to Rs 1,183 per share. Shirish Rane and Bhoomika Nair of brokerage house SSKI had, in a report on October 1, estimated the value of Reliance Energy without Reliance Power at Rs 869 per share. Combining the two takes Reliance Energy’s valuation soaring to Rs 2,052 per share "

"However, grey market trading (speculation) on reliance power ipo has started already. Reliance Power IPO is quoting a grey market premium of around Rs. 25 in the ahmedabad grey market. If Reliance Power IPO is priced at reasonable valuations, the IPO has the potential to become a huge hit and provide excellent listing gains to investors. Reliance Power Limited IPO will have a part payment option for retail investors. If the IPO looks likely to be heavily subscribed, retail investors will take advantage of the part payment option to apply in the Reliance Power IPO. "

"The IPO looks a bit expensive. Currently RPL (Reliance Power) does not have the earnings to justify the valuations. However, my initial feeling is that the IPO should do well. There is more than enough risk appetite in the market. If markets can buy stories of non-existing businesses like RNRL, RPL has a much better chance of acceptance. "

The Equity Shares have not been and will not be registered under the U.S. Securities Act 1933, as amended from time to time (the“Securities Act”) or any state securities laws in the United States and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S of the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Equity Shares are only being offered and sold (i) in the United States to “qualified institutional buyers” (as defined in Rule 144A of the Securities Act) in reliance on Rule 144A under the Securities Act, and (ii) outside the United States to certain persons in offshore transactions in compliance with Regulation S under the Securities Act, and in compliance with the applicable laws of the jurisdictions where those offers and sales occur.

Please note that this is preliminary information for information purposes only. Any indication of Offer Size is indicative and is based on preliminary estimates. Investors are requested to refer to the Red Herring Prospectus for details regarding the issue, the issuer company and the risk factors before taking any investment decision. This communication is for general information purposes only, without regard to specific objectives, financial situations and needs of any particular person. Investors should read Red Herring Prospectus and seek professional advice before taking any actions. Please note that investments in securities are subject to risks including loss of principal amount and past performance is not indicative of future performance. ICICI Securities Limited does not accept any liability whatsoever direct or indirect that may arise from the use of the information herein. The information contained herein does not constitute an offer or an invitation for an offer to invest. By accessing these materials you acknowledge and agree that they are for internal use only. These materials summarize certain points related to the offering and they are not a comprehensive summary. You should refer to the Red Herring Prospectus for more complete information. You understand that under no circumstances may these materials or any part thereof be provided to persons outside India.

Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.

  • Madan

    Is it worth of purchasing Reliance Energy shares at current level and If I purchase 25 shares, how much Reliance Power IPO shares can be expected as bonus and also please tell me how this computation works out??

    Madan

  • prem sagar

    is better to buy mutul funds for reliance divesified power sector . which is better to buy nfo or an existing mutul fund

  • shehzad

    why it is better to buy reliance equity and how much it is offering its equity shares and what is better to invest in mutual fund or equity and what will give me good returns and when its NFO is starting and closing

  • Good analysis

  • anu

    the lowest price in the last 52weeks and the highest price in the last 52 weeks