There’s a hope that Anil Ambani-promoted Reliance Power, the most-awaited listing of recent times, won’t open like a bottle of soda only fizzle out.
Selling pressure likely at higher levels due to leveraged investments
MUMBAI: There’s a hope that Anil Ambani-promoted Reliance Power, the most-awaited listing of recent times, won’t open like a bottle of soda only fizzle out.
Because if that happens the street presages disproportionate pressure on the broader market.
“If it opens weak, negative sentiment could set in, and if it opens well, the market will react accordingly,” said Vikaas Khemani, co-head of institutional equities at Edelweiss Capital.
What are the bets on where the share will open?
Gaurang Shah, chief manager at Geojit Financial Services, bets on a Rs 495-535 band. “Anything more will be a bonus,” he said. Shah’s not sure where the shares will close.
Ambareesh Baliga, V-P of Karvy Stock Broking, sees a Rs 600 opening.
What’s important in the math is the nearly 7 crore retail shares and about 2.25 crore of shares held by high-networth individuals.
Shah says a lot of them are leveraged, meaning they invested using borrowed money.
“These guys would want to take the first road out on listing.”
To each, the cost of acquisition (including interest payable on the loan taken) —- will decide at which price they will exit.
Retail investors had subscribed spurred by the Rs 500-odd premium quoting in the grey market then —- it was a promise of doubling money.
Apprehensions have been raised in the last couple of days on talk that Reliance Power hasn’t been getting bids in the grey market.
But sources said Anil cannot afford to let the shares tank after opening.
“There is the Ambani reputation at stake,” said a broker, who said that there will be some brokers in place to absorb any amount of excessive selling.
"It will take only around $2 billion to mop up the 9 crore shares that can possibly be unloaded, theoretically speaking,” he said.
“That’s manageable for an empire like Anil’s.”
S P Jain, chairman of Sun Capital Services, an investment banking entity registered with the London’s Financial Services Authority is gung-ho.
“I think Reliance Power will list above Rs 625, and stay above that,” he said.
Jain said once the IPO dust settles down, the pre-budget rally in the market will start.
Dhiraj Sachdev, fund manager of HSBC’s portfolio management division does not think any single event can upset the market.
“The market is big enough to weather any storm caused by a single mega-event such as the Reliance Power listing,” he said.
However, if the company does not list well, he feels that power stocks could get hit.
“Otherwise, the broader market will follow cues from the US and other global markets in the short term,” he said.
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