Reliance Power

Initial public offering and controversies

In 2007, Reliance Power issued a red herring stating an intention to go public with an IPO. The proposed IPO was to fund the development of its six power projects across the country whose completion dates are scheduled from December 2009 to March 2014. The Securities and Exchange Board of India, the organisation which regulates activity in the Indian stock market, placed some restrictions based on a complaint about the formulation of the IPO. The complaint also resulted in a public interest litigation being filed against the company. However, the Supreme Court of India passed a ruling that the IPO would go ahead even if any order is passed by any Indian court against the venture.

The IPO opened on 15 January 2008 and attracted $27.5 billion of bids on the first day, equivalent to 10.5 times the stock on offer, thereby creating India's IPO record. The upper cut off price for the bid was ₹ 450 A media report pointed out that, if the company's stock price were to cross ₹650–700, Anil Ambani would go past L. N. Mittal to become the richest Indian. "It is a reflection of world community in the future of India... Investors seem to be confident in the future of Indian economy," Indian Finance Minister, P. Chidambaram told the media about the IPO.

Reliance Power debuted on the stock markets on 11 February 2008. However, the markets were still reeling after the January 2008 stock market volatility, and concerns over speculation that the issue was overpriced sent the stock plummeting soon after its listing. At the end of the first day, the stock traded at a value that was 17 percent lower than its issue price of ₹450. Investors who were betting on the stock reaching 1.5 or even twice its issue price lost a fortune in the process. On 25 February, in an effort to mitigate investor losses, Reliance Power decided to issue 3 bonus shares for every 5 shares held.