Anil's IPO gets better first-day response than Mukesh's

MUMBAI: Anil Ambani-led Reliance Power on Tuesday dwarfed Reliance Petroleum, headed by elder brother Mukesh, in terms of first-day response to their initial public offers as it generated nearly five times higher demand on the bourses.

After making a sort of history by getting fully subscribed within a minute of commencement of bidding for shares on the offer, Reliance Power IPO ended its first day with an over-subscription of 10.52 times. In comparison, the initial public offer of Reliance Petroleum was subscribed 7.5 times on the first day of IPO on April 13, 2005.

The first-day total demand for Reliance Petroleum shares was worth about Rs 20,500 crore, while Reliance Power today generated demand of shares worth about Rs 1,08,000 crore with almost all the bids coming in at the top end of the Rs 405-450 per share price band.

Reliance Petroleum IPO was subscribed 52 times at the end of the bidding process with total demand worth about Rs 1,43,500 crore (32 billion dollars). The IPO had raised close to Rs 2,700 crore, while Anil Ambani group is looking to raise upto Rs 11,700 crore from the country's biggest IPO.

The refining firm had sold 45 crore shares in its IPO at a price of Rs 60 per share, while the power company is offering 22.8 crore shares at a premium to the public.

Reliance Power will get a market capitalisation of more than Rs 1,00,000 crore even if it lists at Rs 405, the lower end of the price band. Currently, Reliance Petroleum has a market capitalisation of Rs 98,865 crore.

Reliance Power premium slips in grey market

MUMBAI: Shrinking grey market premium in the Reliance Power issue, as a result of the bearish mood in the market in the past two sessions, is prompting investors in the non-institutional category to reduce their exposure to the issue. According to market sources, the grey market premium has now slipped to Rs 280, compared to Rs 320 on Tuesday and is way below the price of Rs 400 it had been commanding last week.

Many HNIs are said to have informed non-banking finance companies that they will not be requiring the entire lot of funds that they had initially committed to borrow. If the premium in the grey market narrows down, it would mean lower gains on the day of listing.

For those looking to booking profit immediately on listing this could be a loss making proposition because the listing price has to be significantly higher to cover the cost of borrowed funds. But this could be a boon to some other investors, who are taking a slightly longer-term view on the stock.

If one section of investors pull out, others are likely to get higher allotments. Should the market bounce back around the time of listing, these investors stand to earn higher profits. A day before the Reliance Power issue opened, the premium was hovering at Rs 380, more than 80% over the upper price band. Sensing this interest among retail and high net worth investors, banks and finance houses (many of which are arms of brokerages) have lined up for funding subscription.