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    Q1) What Happened With Reliance Power Case When They Came Up With The Ipo?

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    Nidhi Nikhil Goyal
    Reliance Power's IPO was overvalued and oversubscribed due to hype from the Reliance brand name and optimism in the stock market at the time. The company had no operating assets or cash flow to support the high IPO price compared to peers. Soon after listing, many investors quickly sold their shares, causing the price to decline sharply. To address the crisis, Reliance Power issued bonus shares to existing investors to reduce the effective cost of their shares and Reliance Energy announced plans to buy back shares, though this did not ultimately occur. Regulators imposed a five-year lock-in period on promoters' equity in response. The IPO was oversubscribed 73 times, garnering $190 billion,

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    Q1) What Happened With Reliance Power Case When They Came Up With The Ipo?

    Uploaded by

    Nidhi Nikhil Goyal
    367 views1 page
    Reliance Power's IPO was overvalued and oversubscribed due to hype from the Reliance brand name and optimism in the stock market at the time. The company had no operating assets or cash flow to support the high IPO price compared to peers. Soon after listing, many investors quickly sold their shares, causing the price to decline sharply. To address the crisis, Reliance Power issued bonus shares to existing investors to reduce the effective cost of their shares and Reliance Energy announced plans to buy back shares, though this did not ultimately occur. Regulators imposed a five-year lock-in period on promoters' equity in response. The IPO was oversubscribed 73 times, garnering $190 billion,

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    Reliance power ipo

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    Reliance power ipo

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    Reliance Power's IPO was overvalued and oversubscribed due to hype from the Reliance brand name and optimism in the stock market at the time. The company had no operating assets or cash flow to support the high IPO price compared to peers. Soon after listing, many investors quickly sold their shares, causing the price to decline sharply. To address the crisis, Reliance Power issued bonus shares to existing investors to reduce the effective cost of their shares and Reliance Energy announced plans to buy back shares, though this did not ultimately occur. Regulators imposed a five-year lock-in period on promoters' equity in response. The IPO was oversubscribed 73 times, garnering $190 billion,

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    367 views1 page

    Q1) What Happened With Reliance Power Case When They Came Up With The Ipo?

    Uploaded by

    Nidhi Nikhil Goyal
    Reliance Power's IPO was overvalued and oversubscribed due to hype from the Reliance brand name and optimism in the stock market at the time. The company had no operating assets or cash flow to support the high IPO price compared to peers. Soon after listing, many investors quickly sold their shares, causing the price to decline sharply. To address the crisis, Reliance Power issued bonus shares to existing investors to reduce the effective cost of their shares and Reliance Energy announced plans to buy back shares, though this did not ultimately occur. Regulators imposed a five-year lock-in period on promoters' equity in response. The IPO was oversubscribed 73 times, garnering $190 billion,

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 1

    Q1) What happened with Reliance Power Case when they came up with the

    IPO?
    Reliance Power was a new company. It had almost no assets and cash flow. It was
    riding on the Reliance brand name and also the euphoria in India's stock markets. This
    was further aggravated through the exorbitant price quoted in the grey market before
    the issue. The Power On, India On" slogan created hype and tried to portray over
    dependence of Indias economic growth on availability of power. Indian investor
    considered IPO as a means of making quick money. The shares were sold out
    immediately on opening of the issue. This was the reason of the Reliance Power
    debacle. It was observed that few Mauritius-based foreign institutional investors
    (FIIs) and a domestic bank offloaded almost their entire shareholding in the company
    within
    minutes
    of
    the
    opening
    bell.
    Trading data indicated that as much as 23.77 million shares, 10.4% of the total 228
    million shares sold through the Reliance Power IPO, changed hands on the twin
    bourses of Mumbai (Bombay Stock Exchange and National Stock Exchange) within
    the first four minutes. Sell orders were made at progressively declining prices.
    Reliance Power's downfall was linked to aggressive pricing of the IPO. Analysts
    suggested that it was overvalued when compared with peer companies in India. For
    instance, the IPO price was 450 against the price of NTPC, (the government power
    company) at Rs.250/-. RPL was planning a 28000 MW power plant in 2017 and did
    not have a single operational power plant whereas NTPC had 27350 MW of
    operational power plant in the year 2007. Comparison of the financials of Tata Power
    and NTPC also did not show a very promising picture of RPL.
    Q2) How did Reliance Power meet the crisis?
    As a face saving measure Reliance Power Ltd issued free bonus shares to all
    categories of shareholders, excluding the promoter group (comprising of Reliance
    Energy Ltd.(REL) and the ADA Group), in the ratio of 3 shares for every 5 shares
    held. The proposed bonus offering resulted in reduction of the cost of Reliance Power
    shares with an offer price of Rs. 269 ($5.47) per share for retail investors, 40% lower
    than the IPO price of Rs. 430($8.74) and Rs. 281($5.71) per share for other investors,
    and 37% lower than the IPO price of Rs. 450 ($9.15). REL announced buyback of the
    shares to prevent the shares to slide further that didnt happen although. The
    performance of Reliance Power Ltd. after the IPO was good but not so excellent to
    support this exorbitantly high IPO Pricing.
    Q3) What from regulation point of view happen in the case of Reliance?
    SEBI had put a rider of five-year lock-in period on promoters' equity while disposing
    off a complaint against the proposed initial public offer of Anil Ambani group
    company Reliance Power Ltd. SEBI said: "The entire promoter quota, that is, 20 per
    cent of the capital in RPL shall be locked in for a period of five years from the date of
    allotment in the proposed IPO."
    Q4) How many times was issue oversubscribed?
    During Jan 2008, the maiden public issue of Reliance Power Limited,
    India, was oversubscribed 73 times and garnered an astronomical
    $190 billion. It created many world records.

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