Reliance Power - Part Payment Option

Reliance Energy is going all out to woo retail investors for the upcoming initial public offer (IPO) of its subsidiary, Reliance Power. After deciding to offer shares to retail investors at a 5% discount to the price band of Rs 405-450, the Anil Ambani Group entity intends to provide this investor segment with a “staggered payment” option in this IPO.

Accordingly, retail investors need to pay only 25% of the total investment amount at the time of submitting the application and the rest at the time of allotment on first call.

By availing this option, the investor does not have to lock in the entire amount for which he has applied in the IPO. This means, if a retail investor intends to apply for 100 shares at Rs 450 per share (Rs 427.50 after discount), he would need to pay only Rs 10,687.5 (25% of Rs 42,750 while applying and the rest during allotment, as against the lumpsum of Rs 42,750.

This option brings a level playing field for retail investors vis-à-vis qualified institutional buyers(QIBs), who are allowed to bid in an IPO with just 10% margin while submitting the bids in a public issue. Prominent public issues, which enabled the staggered payment options in recent times include ICICI Bank and Reliance Petroleum.