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AK NOMICS: Switch on the generator, please

AK NOMICS | Ashok Kumar   February 22, 2008
First Published: 23:36 IST(22/2/2008) | Last Updated: 23:38 IST(22/2/2008)

This week at Dalal Street began with an unmistakable buzz. Even as knives must have been sharpened for the final kill during the trading week that commenced, the younger Ambani sibling and his advisors seem to have pulled off, if nothing else, at least a ‘media coup’ following ‘Breaking News’ on TV channels on Sunday that Reliance Power shareholders would be rewarded with bonus shares as a kind of compensation for their losses.

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Now, grandstand stuff as the electronic media made it out to be on Monday morning, even an aspiring commerce graduate could tell you that in simple accounting terms, shareholders are effectively being refunded some of the excess money that had been collected from them at the time of the IPO when the going was good in mid-January.

Given that valuations never figured in the equation in case of this company, perhaps even the equity dilution can be blinked at. That the promoters are not helping themselves to the bonus too would have been laudable but for the fact that they already heaped largesse on themselves pre-IPO.

So, ‘Golden Heart’? Perhaps not, but could it be concern about the fate of the upcoming Reliance Infratel IPO? And yes, what if ‘global factors’ which the ADAG management would have liked us believe was the only cause for its listing fiasco, sends its stock price further downwards? Can shareholders expect yet another dole out? Well, well.

In the meanwhile, the decent response to the IPO of the state owned REC drove home a couple of home truths. As long as an IPO is fairly priced and its prospects are decent, there will be takers. Like NTPC, PFC and Power Grid more recently, REC too has priced its IPO modestly leaving a fair share on the table for investors.

Suffice to say, it’s been some while since an IPO was offered at a single digit P/E and P/B of less than 2. Of course, it is unlikely that shareholders of this PSU will be recipients of a bonus issue immediately after it lists! On the secondary market front, we continue with the one step forward, two steps back charade and notwithstanding the bravest sounding words being bandied on television by ‘experts’, the fact that volumes dry up on the upside proves that clearly, their money is not where their mouth is. ‘Sentiment’ that crucial intangible, remains both, shaken and stirred in a manner that even James Bond would have approved!

So all hopes now shift to that media event extraordinaire’, the Union Budget. Presiding over its preparation and announcement remains Palaniappan Chidambaram, the Hon’ble Union Finance Minister. There are unfair expectations building up among market participants that he will pull the proverbial ‘rabbit out of the hat’ and revive ‘power’ at the bourses.

Till then, someone switch on the generator please?

The author heads Lotus Knowlwealth and blogs at www.theipoguru.blogspot.com


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