Institutions lap up R-Power OFS

It's for the first time now that the promoters are selling their stake in the company since its initial public offering in 2008

Institutional investors today gave a thumbs up to the share auction of Reliance Power (R-Power) Ltd, controlled by Anil Ambani. The promoters of R-Power — Reliance Infrastructure, Reliance Innoven-tures Pvt Limited and AAA Project Ventures Pvt Limited — have managed to sell 5.52 per cent stake in the company at an indicative price of Rs 95.53.

R-Power’s offer for sale (OFS) was oversubscribed by 1.6 times. Bids for 243 million shares were received against 152 million offered. The auction floor price for the issue was set at Rs 93 per share.

The stock fell 0.36 per cent to close at Rs 98.05 on the BSE.

In March this year, the share price of R-Power had touched a 52-week high of Rs 139; In December, it touched a low of Rs 68. As of today, the company’s market capitalisation stood at around Rs 27,500 crore.
 

THUMBS UP

• R-Power’s OFS oversubscribed 1.6 times
• OFS fully subscribed by institutional players
• Against 152 million shares on offer, bids of 243 million received
• R-Power’s promoters - Reliance Infrastructure, Reliance Innoventures Pvt Limited and AAA Project Ventures Pvt Limited — diluted 5.52 per cent of their share in R-Power

According to brokers and bankers, the issue was fully subscribed by institutional players. Retail investors in R-Power had badly burnt their fingers in 2008 and not many stock brokers had issued any advisory to their retail clients during the current auction.

This is the first time since R-Power’s initial public offering (IPO) in 2008 that promoters were selling their stake in the company. The R-Power IPO, which was subscribed 14.4 times and managed to raise around Rs 10,000 crore, had a poor listing on the exchanges.

The share price of the company crashed more than 50 per cent from its IPO price of Rs 450 in a few weeks. R-Power offered a 3-for-5 bonus share to cheer shareholders after a miserable debut of the IPO. The company had received 1.95 million applications from retail investors. The bonus issue effectively reduced the cost of the shares to Rs 269 for retail shareholders, compared to a discounted IPO price of Rs 430. However, till date, the company’s share price has not come close to the IPO price.

According to market experts, the success of OFS will be a confidence booster for the Anil Ambani group. Recently, the group has made several unsuccessful attempts at selling stake in the telecoms tower business.

Promoters were holding 80.42 per cent stake in R-Power as of September 2012 and they had to bring it down to 75 per cent to comply with minimum public shareholding norms. Prior to today’s OFS, Reliance Infra held 38.41 per cent and AAA Project Ventures 22.06 per cent in R-Power.

R-Power says it has the largest captive coal reserves in the private sector, estimated at around two billion tonnes. Besides, it is developing three coal mines in Indonesia as well as a coal bed methane based generation capacity.

OFS in Eros International will open for subscription on Thursday and Adani Enterprise will open on Friday. The floor price for auction of Eros International has been fixed at Rs 200 and the promoters will sell 2.57 million shares. Adani’s promoters will sell 23 million shares and the floor price will be announced on December 20.

Reliance Power, controlled by billionaire Anil Ambani