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Reliance Power IPO

Anil Ambani-promoted Reliance Energy (REL) today announced that its wholly-owned subsidiary Reliance Power will go public soon. The company will file a draft red herring prospectus with the Securities and Exchange Board of India shortly.
Reliance Power is expected to mop up $3.5 billion (Rs 14,000 crore) from the market, which will be the biggest public float in recent times after the issues by DLF and ICICI.
The company plans to add 25,000MW capacity through new projects and expansion of capacity over the next couple of years. Much of the funds raised will be used for this purpose.
Going by the market value of Rs 4 crore per MW of energy, the company is valued at Rs 100,000 crore, according to investment bankers.

On the basis of this valuation, Reliance Energy will offload nearly 8% stake through the proposed IPO.
The company is in talks with investment banks such as Kotak Mahindra Capital, JM Financial, J P Morgan, HSBC and Enam among several others. The company will appoint a separate banker to sell the issue overseas.
A major portion of the funds raised will go into the 4,000MW Sasan coal-based power project which the company bagged recently. The plant, which is expected to be completed in five years, will supply power to Madhya Pradesh, Uttar Pradesh, Delhi, Rajasthan, Haryana, Punjab and Uttarakhand.
REL had floated a special purpose vehicle, Sasan Power, to execute the project. The SPV was later merged with Reliance Power, a five-year-old company which has executed about 268MW.
Explaining the higher investment in Sasan, a company executive said, “We are investing Rs 25,000 crore in a gas-based 7,000MW plant in Dadri, but since coal-based plants are costlier to set up, we are planning to invest Rs 20,000 crore for the 4,000 MW plant in Sasan.”
The Reliance Anil Dhirubhai Ambani Group has a market capitalisation of over Rs 200,000 crore on the stock exchanges, a net worth in excess of Rs 40,000 crore, cash flow of Rs 9,000 crore, and net profit of Rs 5,000 crore with zero net debt.
There are rumours floating in the market that Reliance Energy is about to file the draft red herring prospectus (DRHP) with SEBI for the Reliance Power IPO. The shares of Reliance Energy touched an all time high today on rumours of Reliance Power IPO. Reliance Power is a 51% subsidiary of Reliance Energy. Reliance Energy and the other reliance groups companies have witnessed a strong rally in their share prices in the past few trading days. Reliance Power IPO is tipped to be one of the largest IPO’s to hit the capital market. The Reliance Power IPO is expected to raise over 11,000 crores making it larger than the DLF IPO and the ICICI Bank FPO. When contacted, the Reliance Energy management declined to comment on the Reliance Power IPO saying as per the company’s policies they do not comment on market rumours. The lead managers of Reliance Power IPO are Kotak Mahindra Capital and JM Financial. It is said that the DRHP for Reliance Power IPO is likely to be filed in the coming few days.

The initial public offering (IPO) would be to raise money to develop mega power projects, India’s Mint business paper and The Economic Times said.

Reliance Power, a unit of the Bombay Stock Exchange-listed Reliance Energy Ltd, was expected to file the prospectus with market authorities next week, Mint reported, quoting two people close to the plan.

Reliance Energy, led by billionaire businessman Anil Ambani, declined to comment on what the company called “market speculation,” the newspapers said.

Reliance Power, part of the Reliance-Anil Dhirubhai Ambani Group or R-ADAG, has been valued at around 11 billion dollars.

Reliance Power aims to sell shares equivalent to a 15-30 percent stake in the company, the reports said.

The share sale is part of a plan to restructure Reliance Energy into three distinct businesses in power, real estate and infrastructure, Mint quoted an unnamed R-ADAG official as saying.

Each of these businesses could be listed at a later date, the executive said.

Reliance Power won rights to develop a 4,000-MW mega power project at Sasan in the central state of Madhya Pradesh in June. Its parent, Reliance Energy is building a 1,200-MW power plant at Rosa in northern Uttar Pradesh state.

A sector expert said the possible share sale and restructuring could make it easier to raise finances for the mega power projects.

“It looks like they are putting their generation projects into one company, which would make it easier for them to raise money for these capital-intensive projects,” said Arvind Mahajan, a senior official of consulting firm KPMG International.

Reports of the IPO drove Reliance Energy Ltd shares up 7.9 percent to 1,205.50 rupees on Friday.

Reliance Power IPO Listing , Allotment Details and Grey Market Premium

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