Posted by: Manjeet Krpalani on February 11, 2008
The Bombay Stock Exchange was so bedecked, it almost looked like it was hosting a wedding. Instead, it was the listing of the initial public offering of Reliance Power, a greenfield power generation and distribution business headed by Anil Ambani, one of two brothers who between them run perhaps the largest businesses in India.
Giant boards with the Blue, red and white logo of Reliance Power stood on either side of a big brass bull, and a red carpet led up the stairs to the Exchange. Expensive orchids trimed the entrance canopy. Inside the round convention hall - once the pit of the exchange before it went electronic – there’s a large, heavily garlanded portrait of Dhirubhai Ambani, founder of the Reliance group of companies and Anil Ambani’s father. All the top investment bankers – from Kotak Mahindra to Deutche Bank to ICICI Securities to UBS – who had been given the IPO mandate were present, as were hordes of press, and several worthies of Bombay city.
At 9.30 am sharp, Ambani’s mother, Kokila, his wife Tina and his two sisters walked in, as bedecked as the Exchange. The listing is clearly a family affair – and shows the world that Ambani is supported in his ambitions by the extended family. Conspicuously missing is older brother Mukesh – bad blood between the two brothers separated the family business in 2004, and they’ve been apart since. Mukesh kept the cash-spewing petrochemicals business, and younger Anil got telecom, power and finance.
They’re both in a hurry to prove they’re just as formidable apart from each other. This is Anil Ambani’s first real attempt to raise megabucks, and his future ambitions depend on its success. He’s already got another IPO coming up, that of Reliance Tower, the cell tower business spun off from the telecom venture. So he was pumped up this morning. He talked about the 420,000 retail investors that Reliance Power had attracted and the 500 foreign investors, among others; the $190 billion in subscriptions that his $3 billion IPO had attracted. “It’s the power of India,” he said. But it’s really the power of Reliance and Ambani to make money on the markets for their investors that has drawn the crowds.
At 9.55 am precisely, Anil Ambani rang the gong and the Reliance Power share hit the market. It was quoted at the offer price of $11.50. A second after the listing, it moved up a millimeter, then began to sink. The people in the hall gathered by the giant screen and watched with astonishment as the numbers began to decrease. By 9.58 am, three minutes after the listing, the stock had dropped to about $10, and by the time the market closed on Feb 11th, the Reliance Power price was about $9.50, down 17%.
What a shock. The issue had been so hyped up, and the premium of $11.50 that investors had predicted the stock would fetch, seemed so possible. Of course, the Indian market was also down 8% by the end of the day, and analysts say it would naturally have affected the Reliance listing. But a lot has happened between Jan 4, when the Reliance Power IPO was announced, and Feb 11. The subprime crisis hit the US, a recession loomed and global markets swooned. India was not immune. And neither was Reliance, that unbeatable machine.
Market observers say the company will let the sellers sell, then start moving aggressively over the next couple of days to support the stock. Many expect it to move back to $11.50 levels soon.
Wait and watch. Reliance has never known to be defeated by the stock market – not yet.