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October 8, 2007

Reliance Power files DRHP with SEBI

Anil Ambani is gearing up for mega power play and his big ambitions are being driven by the youngest firm in his group, Reliance Power. Reliance Power is set to raise around Rs 10,000 crore through the largest initial public offering in the Indian markets. As per the Draft Red-Herring Prospectus (DRHP) filed with SEBI Reliance Power will issue 130 crore-equity shares of Rs 2 each.

The issue will be 11.5 per cent of post diluted capital in which promoters will subscribe to 16 crore shares. Net issue, which will comprise 114 crore-equity shares will constitute 10.1 per cent of post issue equity capital. While Reliance Energy will hold 51 per cent in Reliance Power, issue price is likely to be between Rs 70-90 per share. Total issue size may be between Rs 8,000-10,000 crore dwarfing DLF and ICICI offerings, which raised Rs 9,187 crore and Rs 8,898 crore respectively.

Post issue Reliance Power which has bagged the contract for the Sasan Ultra Mega Power Project will rank among the top eleven companies with a market capitalisation of close to Rs 1 lakh crore.

Back of the envelope calculations suggest that if the issue is priced at the lower end of the expected band the company will have a market capitalisation of Rs 79,000 crore. However, if the issue is priced at upper band which most analysts expect it to, Reliance Power's market capitalisation would comfortably Rs 1 lakh crore and surpass India's largest bank SBI. For Reliance Power the plans are grand indeed, Reliance Energy plans to invest about Rs 80,000 crore on power projects in the next 5-7 years and generate 25,000 MW equaling current capacity of arch rival NTPC. Though market seems to be gung ho about the proposed investment plan helping Reliance Energy stock touch its lifetime high of Rs 1,479, however, how well the company executes the plan on ground will hold the key to its success.

(Source: Asian CERC )

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