Reliance Power slumps on debut; IPO appetite dulled
Shares in India's Reliance Power sank as much as 21 percent in a chaotic debut on Monday as valuation concerns and global market turmoil dented investor demand following its $3 billion IPO, the country's largest.
The poor start for a share that had initially been expected to double was a further setback for India's record pipeline of IPOs this year. Two offerings, including a $1.6 billion one from Emaar MGF Land, were shelved last week after a tepid response triggered by the global credit crunch and U.S. recession worries.
"It will definitely hit investor sentiment in other IPOs as new entrants in the market will think several times before pricing their offer aggressively," said D.D. Sharma, vice president at Anand Rathi Securities.
Reliance Power, controlled by billionaire Anil Ambani, sold out within a minute last month when it opened its record IPO to finance the building of power plants across India.
The offer for around a tenth of the company was priced at Rs.450 ($11.4) a share, the top of range, and the $3 billion raised made it the world's biggest offering so far in 2008, according to Thomson Financial.
Analysts first expected Reliance to touch Rs.900 when it began trading, but stock market turmoil lowered investor risk appetite and analysts subsequently said a start of Rs.75-150 above the IPO price was more realistic.
But after rising briefly to Rs.599.90, the shares dropped to a low of Rs.355.05 and closed down 17.2 percent at Rs.372.50. The benchmark index ended nearly 5 percent lower.
Reliance Power was the top traded stock on the Bombay exchange with nearly 64 million shares changing hands.
Shares in Reliance Energy, which holds 45 percent of Reliance Power, fell as much as 22 percent and ended 19.4 percent lower at Rs.1,582.30.
Chairman Anil Ambani rang the bell at the Bombay Stock Exchange for the start of trade on Monday, saying: "I'm confident our long-term investors will reap rich rewards by investing in the company."
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