UNDER THE arrangement, the broker will pay Rs 10,000, while the investor will bid for the IPO (maximum Rs 100,000) on behalf of the broker and will sell the allotted shares on the listing day. Moreover, a majority of the retail applicants are likely to get a fair share of the allotment given the huge issue size (26 crore equity shares with a face value of 10 rupees each).

 

It’s a win-win deal. While the broker stands to make more listing gains on the back of higher allotment, the demat account holders will receive Rs 10,000 for leasing their account for a period of just three weeks. Given that Reliance Power shares are trading at a premium of Rs 400 in the grey market, the brokers will be able to generate substantial gains over and above the rent paid.

 

Reliance Power IPO, the first from the Anil Dhirubhai Ambani stable (ADAG), is slated to become the largest initial public offering on the Indian bourses, eclipsing realty giant DLF’s IPO. The IPO is scheduled to open for subscription between January 15 and January 19 with a price band of Rs 405-450. The shares are likely to get listed on BSE (Bombay Stock Exchange) as well as NSE (National Stock Exchange) in the first week of February.

 

Further, in line with the Reliance group’s tradition of making IPO applications retail investor-friendly, Reliance Power may dole out several incentives, such as a flat Rs 20 discount on the offer price that will be determined through cent percent book-building. Reliance Power management may also allow retail investors to pay just Rs 115 per share at the time of applying. Brokers and institutional investors who are preparing to bid through the retail route also stand to gain from such arrangements.

 

Most analysts believe that the Reliance Power IPO will make significant listing gains, though they are a bit cautious while trying to derive a fair value of the stock in the absence of meaningful earnings, given that all its projects are in the implementation phase. However, the traditional euphoria surrounding a Reliance brand IPO has spilled over to Reliance Power and the issue is likely to be heavily oversubscribed.

 

Reliance Power is currently developing 13 medium and large-sized power projects with a combined planned installed capacity of 28,200 MW. The identified project sites are located in western India (12,220 MW), northern India (9,080 MW), north-eastern India (2,900 MW) and southern India (4,000 MW).