Initial Public Offering and Controversies
On January 15, 2008, the company attracted $27.5 billion of bids on the first day of its initial public offering (IPO), equivalent to 10.5 times the stock on offer, thereby, creating India's IPO record. The upper cut off price for the bid was Rs. 450 The proposed IPO was to fund the development of its six power projects across the country whose completion dates are scheduled from December 2009 to March 2014.
A media report suggested that, if the company’s stock price were to cross Rs. 650-700, Anil Ambani would go past L. N. Mittal to become the richest Indian. "It is a reflection of world community in the future of India... Investors seem to be confident in the future of Indian economy," Indian Finance Minister, P. Chidambaram told the media about the IPO.
The Securities and Exchange Board of India, which is an organization that regulates the activity in the Indian stock market, placed some restrictions based on a complaint about the formulation of the IPO. The complaint also resulted in a public interest litigation being filed against the company. However, the Supreme Court of India passed a ruling that the IPO would go ahead even if any order is passed by any Indian court against the venture.
Reliance Power debuted on the stock markets on February 11, 2008. However, the markets were still reeling after the January 2008 stock market volatility, and concerns over speculation that the issue was overpriced sent the stock plummeting soon after its listing. At the end of the day, the stock traded at a value that was 17 per cent lower than its issue price of Rs. 450 . Investors who were betting on the stock reaching 1.5 or even twice its issue price lost a fortune in the process. On February 25, in an effort to mitigate investor losses, Reliance Power decided to issue 3 bonus shares for every 5 shares held.
Read more about this topic: Reliance Power
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