First day, no show !

It was an exception in many ways. It was to be a blockbuster issue, but the magnitude of fall took even optimists by surprise. The Reliance Power issue ended day one at Rs 372.5, 38% down from the day’s high. To put things in perspective, the average difference between the highest and closing prices of the 10 biggest IPOs of 2007 was barely 13.4%.

It is the first IPO from the Ambani stable, to close the first day of trading in red. Reliance Petroleum, which listed on May 11, 2006, opened at a premium of 70% and closed at 42% over its offer price on its debut.

ADAG stable has spawned a number of issues — R-Com, Reliance Capital, Reliance Energy and RNRL. However, the issues were not IPOs in the true sense. Most of these companies, were the result of the demerger of Reliance Industries. Most of these issues opened at a premium to the fair value.

The Reliance Natural Resources (RNRL) listing in 2006, did not see a consensus on the fair value of the share. It was anticipated to be anywhere between Rs 5 and Rs 20, but opened at Rs 17.5. Sources also say that the erstwhile Reliance Industries, which got listed in the late 1970s, offered a share at Rs 10 a piece and opened at Rs 16.
Comparing Reliance Power with its Ambani predecessors may not be apt as it was in the distant past. For a more holistic view, one needs to consider the IPOs of 2007.

Of the 10 biggest IPOs of 2007, as many as seven opened in green or where opening price was higher than issue price. Mundra Port opened at Rs 770 per share, while the issue price was Rs 440, which translates to a gain of 75%. Similarly, Power Grid, whose issue price was Rs 62, opened at Rs 85, witnessing a gain of 63.5%.

Intra-day high, vis-a-vis, the issue price, saw Mundra Port and Power Grid register a whopping 161.4% and 110.4% gain. Seven of the major IPOs in 2007 closed in the green on the first day.