Reliance Power IPO

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SAT refuses to stay Reliance Power IPO, opens on Jan 15

Friday, January 4, 2008

By CNBC-TV18's research analyst, Raja Rajeshwari - Securities Appellate Tribunal (SAT) has refused to stay ADAG's Reliance Power IPO. The IPO is scheduled to open on January 15, 2008, reports CNBC-TV18.

Reliance Power is planning to raise around Rs 10,530-11,700 crore from its initial public offering (IPO) of 26 crore equity shares with a face value of Rs 10, for cash, a price decided through 100% book building process. The price band has been fixed at Rs 405-450 per share.

The IPO will open on January 15 and close on January 18, 2008. Net issue would constitute of 10.1% of post issue paid up capital of the company. Outstanding shares post issue will be of 226 crore equity shares.

Market cap will be Rs 91,530-101,700 crore (USD 23.23-25.8 billion).

The proceeds from the issue will be used for part financing power subsidiaries and for 13 power generation projects. The projects will be developed by 9 subsidiaries. Some funds will be used for general corporate purposes.

There are some risk factors to the issue. SEBI has ordered that promoter's 20% stake to be locked in for 5 years. There is no non-compete clause with Reliance Energy, only mutual understanding.

The company has 7 projects worth Rs 77,095-92,650 crore. There is an execution risk as raw material has not tied up yet.

At 20% equity portion, the dilution could be to the tune of Rs 15,000-18,500 crore.

The company has not submitted project implementation schedule for MP Power. ADAG's other company, RNRL is in litigation for gas, which is to be used for Shahapur and Dadri.

Krishnapatnam and Shahapur projects are coal based projects. The company has not tied up for coal yet.

RNRL does not have any coal reserves. Again, one of the coal blocks for Sasan project is under litigation.

Source : http://news.moneycontrol.com

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