After few delays, reliance power finally filed its red-herring prospectus with the Registrar of Companies, Maharshtra, for its forthcoming equity issue. Reliance has fixed the price band at 405 to 450 per share and retail investors would be offered discount of Rs 20 per share. The IPO is scheduled to open on January 15, 2008 and will close on January 18, 2008.

As per unconfirmed reports, current share application premium in grey market in jaipur and Ahemdabad is going at Rs 9000 at Rs 1 lac application; which is too high as per prevailing standards. The shares would be listed at BSE and NSE exchanges.

Reliance Power has also fixed convenient payment terms for all categories of investors. While QIBs are required to pay 10% on the application, the retail investors will have the option to pay Rs 115 on the application, i.e. only approximately 25% of the issue price. The balance amount will be payable on allotment.
 
This is one of the largest IPO in the history of the Indian capital markets where 26 crore equity shares of Rs 10 each including a promoters’ contribution of 3.2 crore would be issued. Promoters too would be allotted Equity Shares at the IPO price. The net issue will constitute 10.1% of the post-Issue paid-up equity capital of Reliance Power.

The company is currently engaged in the construction and development of various gas and coal based thermal power projects and hydro power projects in various parts of the country, of over 28,000 MW capacity - the largest development pipeline in the country.

Whenever, any such large IPO is announced, markets witness substantial fall as investors withdraw their money form current holdings. During RPL issue, the sensex tumbled by about 2000 points in few trading sessions.

How should this IPO be viewed? For one, definitely to be applied. Though, it is expected to be heavily oversubscribed and share allotment ratio is expected to be low.

For contrarian investors looking for short term gains in a period of say 2-3 months, this opportunity, if it leads to dip in the secondary markers due to withdrawal of funds, can also be used to enter secondary markets.

A judicious mix of making small applications as well as entering select large cap shares which register fall prior to the share issue may prove to be most rewarding option.