K.R. Balasubramanyam
ambitious venture, Reliance Power Limited, is slowly picking up. But investors are miles away from recovering even half their investments, let alone make profits.
In February 2008, when the promoter fixed the initial public offering (IPO) allotment price at Rs 450 a share, analysts raised their eyebrows over the valuation. More so because the company did not have a single megawatt (MW) of its own operating assets to showcase. Ambani raised Rs 11,563 crore.
The crash of the stock on listing, and later the stock market itself, is now part of history. To demonstrate he was with small investors, Ambani later issued three bonus shares for every five shares that retail investors held, diluting his own stake in the company. He now controls 75 per cent of the Mumbai-headquartered company.
The stock was trading at Rs 93.40 on the Bombay Stock Exchange (NSE) at 2 pm on Tuesday, January 29. The retail investor, who got a small discount in the IPO price, will recover his investment only if the stock touches Rs 271.
On the performance front, the company, led by
Jayarama Chalasani, has been doing well. The 3,960 MW Sasan ultra mega power project is expected to go on-stream in the next few weeks, ahead of schedule. The 1,200 MW Rosa power project in Uttar Pradesh operated at 103 percent load factor. At Rs 493 crore in the October-December quarter, EBITDA (earnings before interest, taxes, depreciation and amortisation) rose 252 percent, delivering a profit of Rs 266 crore at the net level.
Announcing the results on January 25, Chalasani said: "The third quarter has proved to be an excellent one for the company as we turned in outstanding operational and financial numbers."
It was a good performance, but analysts say the price at which the stock is trading is fair. The stock, they say, will move up the price curve only if its liquidity and profits improve dramatically, to reflect in its book value and earnings per share.
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