Well, here's an excerpt from http://www.e-investing.in/
Reliance Power IPO has been hit by serious allegations about corporate governance and wealth destruction for REL shareholders.
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Reliance Energy's assets will be taken away and given to Reliance Power.
Anil Ambani will have 50% stake in Reliance Power.
Anil Ambani has got this stake for only Rs 500 crore.
After the IPO, Anil Ambani's stake will be anywhere between Rs 35000 crore to Rs 45000 crore.
35 to 45 times returns by just making a new company and floating an IPO. Nobody can make money better than the Ambanis. .
Even if the promoters subscribe to 14 crore shares in the IPO, their financial contribution to the company will still be far smaller than those of the other shareholders.
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So who loses?
First are the Reliance Energy shareholders. They currently hold 100% of the assets that are being passed on to Reliance Power. After the IPO they will own just 50% of Reliance Power.
If these projects had been retained by Reliance Energy, it could have done the same job that Reliance Power will be doing. In fact, there is no logical reason to float a separate company except to make Anil Ambani richer.
Next will be those who subscribe to the IPO. They will be investing Rs 12000 crore in Reliance Power and get 10% or so stake. Anil Ambani got 50% stake (post-IPO 44% or so) for Rs 500 crore.
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The valuations that Reliance Power expects are stretched too. Once the price band is announced, I can comment better on that.
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In spite of the above facts, I still think Reliance Power IPO should do well.
The reason is the kind of optimism in the markets.
This market is not looking for companies that make profits. This market is looking for companies that make stories.
Tell them you will have XXX profits after 5 years and the markets will buy all the stock that you have to offer.
Today, nobody cares about feasibility of future plans......you just need to have a plan in this market and you will be a rich man.
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Once again one can also hear a more topical view by Udayan of CNBC-TV18 here.
or read the transcrpit here
Reliance Power IPO has been hit by serious allegations about corporate governance and wealth destruction for REL shareholders.
==================================================
Reliance Energy's assets will be taken away and given to Reliance Power.
Anil Ambani will have 50% stake in Reliance Power.
Anil Ambani has got this stake for only Rs 500 crore.
After the IPO, Anil Ambani's stake will be anywhere between Rs 35000 crore to Rs 45000 crore.
35 to 45 times returns by just making a new company and floating an IPO. Nobody can make money better than the Ambanis. .
Even if the promoters subscribe to 14 crore shares in the IPO, their financial contribution to the company will still be far smaller than those of the other shareholders.
==================================================
So who loses?
First are the Reliance Energy shareholders. They currently hold 100% of the assets that are being passed on to Reliance Power. After the IPO they will own just 50% of Reliance Power.
If these projects had been retained by Reliance Energy, it could have done the same job that Reliance Power will be doing. In fact, there is no logical reason to float a separate company except to make Anil Ambani richer.
Next will be those who subscribe to the IPO. They will be investing Rs 12000 crore in Reliance Power and get 10% or so stake. Anil Ambani got 50% stake (post-IPO 44% or so) for Rs 500 crore.
==================================================
The valuations that Reliance Power expects are stretched too. Once the price band is announced, I can comment better on that.
==================================================
In spite of the above facts, I still think Reliance Power IPO should do well.
The reason is the kind of optimism in the markets.
This market is not looking for companies that make profits. This market is looking for companies that make stories.
Tell them you will have XXX profits after 5 years and the markets will buy all the stock that you have to offer.
Today, nobody cares about feasibility of future plans......you just need to have a plan in this market and you will be a rich man.
-------------------------------------------------------------------
Once again one can also hear a more topical view by Udayan of CNBC-TV18 here.
or read the transcrpit here
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