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Long-term investors will gain: Ambani

Chairman of Reliance Power talks to Arun Kumar about investors' expectations by delevering superior long-term returns.

business Updated: Feb 11, 2008 18:24 IST
Arun Kumar

There is concern that the recent meltdown in global and Indian stock markets could affect the listing price of Reliance Power?

These are normal cyclical phases in global capital markets and India, driven by economic liberalisation, can not remain insulated. However, I am confident that long-term investors will reap good returns on their investments in shares of Reliance Power, regardless of short-term fluctuations, which affect all stocks and not just Reliance Power.

Do you feel you have been too aggressive in pricing the IPO, given that the company has no operating assets?

The fact that the IPO received commitments of nearly Rs 7,50,000 crore ($190 billion), setting several new global records, is testimony it was attractively priced.

Was the record over-subscription achieved only because of the hype surrounding the IPO?

This is too narrow a view. To say that nearly 500 sophisticated institutional investors from across the globe and 5 million retail investors were all taken in by hype is an unfair comment on their collective intelligence. The fact is that the IPO received this overwhelming response because of investors' confidence in Reliance Power's attractive and unparalleled portfolio of multi-feedstock power projects aggregating over 28,000 Megawatts under development and our record of delivering superior returns to investors.

But the grey market premium ahead of the IPO is said to have contributed to the response?

This is again a coloured view. The lack of depth, and unreliability of the so-called grey market is well known to all investors. The alleged grey market activities are the focus of only a limited number of speculators and leveraged players, who participate in an insignificant way in an IPO. Sophisticated institutional investors and the wider universe of retail investors subscribe on very different multi-dimensional long-term considerations.

Then, why is there so much anxiety regarding the listing price?

The events of the global capital markets in the past few weeks are perhaps responsible for this sentiment. Also, selective speculative players and certain vested industrial investors are deeply concerned at the continuing success of our group.
speculators and leveraged players, who participate in an insignificant way in an IPO. Sophisticated institutional investors and the wider universe of retail investors subscribe on very different multi-dimensional long-term considerations.

Then, why is there so much anxiety regarding the listing price?

The events of the global capital markets in the past few weeks are perhaps responsible for this sentiment. Also, selective speculative players and certain vested industrial investors are deeply concerned at the continuing success of our group and its unparalleled value creation for its over 7 million investors in just around 30 months.

Post allotment, the feedback we have received from all categories of investors has been one of disappointment that their allotments are only a small fraction of what they had applied for in the IPO. The facts are that institutional investors have received just over 1 per cent of what they had applied for, HNIs got just over .5 per cent and the bulk of the retail investors have got 15 shares against their applications for 225 shares. We are confident that over a period of time these investors will look forward to increasing their shareholding.

All our long-term institutional investors, as well as millions of retail investors, are fully supportive of the group, and have reposed full confidence in our ability to deliver superior sustainable returns.