Business | Markets
Shares of Reliance Power slump 21% on debut despite massive demand
Shares in India's Reliance Power sank as much as 21 per cent in a chaotic debut as valuation concerns and global market turmoil dented investor demand following its $3 billion IPO, the country's largest.
- Reuters
- Published: 21:59 February 11, 2008
- Image Credit: Reuters
- Anil Ambani, chairman of the Anil Dhirubai Ambani group, sounds a gong as other officials watch during the listing ceremony of Reliance Power on the Bombay Stock Exchange. Reliance Power, which last month made India's largest initial public offering of $3 billion, fell at its debut on the stock market yesterday.
Mumbai: Shares in India's Reliance Power sank as much as 21 per cent 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 US 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 Rs450 ($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 Fin-ancial.
Analysts first expected Reliance to touch Rs900 when it began trading, but stock market turmoil lowered investor risk appetite and analysts subsequently said a start of Rs75-Rs150 above the IPO price was more realistic.
But after rising briefly to Rs599.90, the shares dropped to a low of Rs355.05 and closed down 17.2 per cent at Rs372.50. The benchmark index ended nearly five per cent 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 per cent of Reliance Power, fell as much as 22 per cent and ended 19.4 per cent lower at Rs1,582.30.
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