Despite global meltdown and negative sentiment in markets, Anil Dhirubhai Ambani's Reliance Power Limited (RPL) raised $ 3 billion (Rs 11,850 crore) in less than a minute when the IPO opened on 15 January as investors jostled to get a share in the pie.

Four days later on 18 January, the issue was subscribed 72.9 times over and received an astronomical record subscription of Rs 7.5 lakh crore. The RPL plans to fund 7060 mw capacities by 2014, including Ultra Mega Power Plant at Sasan (3960 MW), Madhya Pradesh.

Recently, the company also won bid for Krishanapatnam UMPP (4000 MW) in Andhra Pradesh. No less than the Finance Minister P Chidambaram underlined the significance of such a huge response.

In an informal chat with journalists, Chidambaram said: "It is a reflection of world community in the future of India. Investors seem to be confident in the future of Indian economy." Significantly for Anil Ambani too, this reflects investors' confidence in him after he split with his brother Mukesh, to form Anil Dhirubhai Ambani Group in 2006.

Following Dhirubhai Hirachand Ambani's death in 2002, a bitter succession struggle ensued between the two brothers with Mukesh taking control of oil and petrochemicals giant Reliance Industries Ltd, while Anil gained a toe-hold in the fast-growing sectors such as financial services, infrastructure, entertainment and power.

The Reliance Power IPO is greater than the combined subscriptions recorded by five top companies in India so far, namely Mundra Port, Power Grid Corp, Reliance Petroleum, Idea and Power Finance Corp.

No doubt, investors would gain in short term. But the moot question is whether it would be prudent enough for long term investors to hold on to the IPO? What attracted millions to this IPO is equally important? Two compulsive factors seem to have roped them in, notes Dr S Subramanian who heads the Investment Banking at Enam Financial Consultants.

"Brand equity of Reliance and Anil's plan to dream big has enabled the IPO to set a new benchmark in fund mobilization." Agrees Hitesh Agarwal, who heads the research division at Angel Broking. "Whether it is Reliance Industries or ADAG, they have brand equity. So investors would confide in them."

A third factor that has immensely contributed to the success of IPO is the 12 per cent power deficit at 22,000 MW. Centre realizes if gap were to widen then this could short circuit the Indian economy.

Power Minister Sushil Kumar Shinde says government plans to add up to 80,000-megawatt capacity to bridge the gap under the 11th Five-Year Plan and plans to add 8-lakh MW by 2030. Of this 14 per cent is estimated to come from private sector. "If we have to achieve, maintain and grow beyond 9 per cent, we would need power," points out Dr Subramanian.

Globally utilities are among least fancied. But in India power market have had an electric response as Power Trading Corporation, Lanco Infratech, NTPC, Power Grid Corporation, Tata Power, Neyveli Lignite, Cairn India, GVK, Jaiprakash Hydro have tapped the market during the last one year.

More firms like Sterlite Energy, GMR Group, JP Associates and JSW Energy plans to follow suit. So far Reliance Power has been able to attract investors on 'promises' alone as projects undertaken by them are yet to be tied up.

It will be two years from now in March 2010 when RPL will be able to generate and sell power. However, this would be a mere 10 per cent of the total capacity. The company will be able to breakeven only when its first ultra mega project at Sasan is commissioned in 2013 as per the agreement with the Centre.

It will take another three years for the entire 3,960 MW to go on stream. Having successfully mobilized capital, Anil and his managers need to concentrate on the issues of fuel for Krishnapatnam project which will be run on imported coal.

Secondly, the delay over 7,480 MW Dadri gas-fired project due to gas supply from the KG Basin by Reliance Industries Ltd is a cause for concern as the dispute over gas supply is yet unsettled.

But bigger challenge that awaits Anil Ambani is timely execution of projects that may be affected on account of global shortage of power equipment. For this, RPL plans to tie up with Chinese suppliers and manufactures on its own.

Some observers point out that when Reliance Power's entire 28,200 MW capacities goes on stream by 2016 the state-run NTPC's capacity too would be over 75,000 MW. But this should not worry anybody says Agarwal as India is one of fast growing economies in the world.

Let us wait and watch Anil, a fitness freak, who pounds pavements of Mumbai every morning, how he inspires RPL to perform harder to deliver on his dreams.

Source : newindpress.com