Billionaire Anil Ambani's Reliance Power raised $3 billion within a minute on Tuesday when India's biggest initial public offering (IPO) was fully subscribed.
"Reliance is power" and "Reliance is trustworthy," say seasoned investors but how will the Reliance Power IPO work for you and should you invest in it all? Power to the People, a special show on CNN-IBN hosted by Paromita Chatterjee, asked these questions to leading investment consultant S P Tulsian.
The IPO's issue size is Rs 10,530 crore-Rs 11,700 crore and the company is offering 26 crore shares. Thirty percent of the issue is for retail investors, who can buy the IPO either by paying in installments or making a full payment upfront.
EMPOWERING: Reliance Power will use the IPO funds to build power generation units in India.
Minimum bid
Bangalore resident Shailendra Mishra wanted to buy the IPO but had a doubt. "The final allocation is Rs 25,875the minimum bid to avail the part payment optionbut what if I am allotted shares less than that amount? Will it be considered part payment or full payment and can I sell the shares at the time of listing?" he asked.
"That would depend on how many times the issue is subscribed," said Tulsian. "Shailendra will be making an application for 225 shares and he will be paying Rs 115 in the retail category. If the retail portion gets subscribed by four times then he will receive fully paid-up shares. Those shares will be traded from day one of the listing. If the retail portion is subscribed less than four times then he will receive only party paid shares. For the balance amount he will get call notice," said Tulsian.
Any chance for small investor?
Many CNN-IBN viewers wanted to know when there is such a massive demand what chance does a small investor have to buy the IPO. What is the chance of getting just 200 shares?
"That would again depend on how many times the retail category is subscribed. If I presume it gets subscribed seven times people who applied for 225 shares are likely to get 30 shares. If the issue gets subscribed 10 times then in that situation the likely allotment will be anywhere between 20-22 shares. But in all likelihood people applying for 200-225 shares are likely to get a firm allotment of at least 15 shares," said Tuslian.
What if the issue gets subscribed more than 100 times? How many shares will a retail investor get?
"Each category is separate and watertight and has no relation to the other. If the retail category is oversubscribed 10 times the allotment ratio will be 10 percent even if the other categories are oversubscribed 100 times. A retail investor needn't worry if he has applied for up to 225 shares," said Tulsian.
Wait till closing day, Jan. 18?
If allotment depends on how many times the issue is subscribed should retail investors then wait till the last day of trading and then bid?
Tulsian wouldn't advise that. "That is not the right strategy because the issue would probably close in the evening and only then you would come to know the exact figure. The likely subscription figure is seven-eight times and even if it is oversubscribed 10 times you have a chance," he said.
Minimum bid
What is the minimum amount one should invest to get an allotment?
"Retail investors need apply a minimum of 15 shares or in multiples thereof. My advice is if one could afford to go for 225 shares, which would require an investment of Rs 26,000, then there is a good chance one getting a firm allotment," said Tulsian.
And is it advisable to opt for the partial payment option considering there is such a huge demand?
"It is very much advisable," said Tuslian. "Why block your money by bidding at Rs 450? Apply in the partial category under payment method one, in which you need to pay Rs 115 on application."
Source : IBNLIVE.COM
