There is a mad rush for IPO funding now a days. Looking at recent big IPOs like Mundra Port, in which NII category subscribed 154 times of their reserved portion of shares and Reliance Petroleum's NII category got subscribed 58 times.
Reliance Power IPO
There has been huge rush for Reliance Power IPO after looking at its pre IPO response.
The IPO price band is between Rs 405-450 per share and lot size is 15 shares and in multiples thereof.
It will open on January 15 and close on January 18, 2008. The company is entering capital market with a public issue of 26 crore equity shares. Net issue to the public will be 22.8 crore shares. The company is going to raise more than Rs 10,000 crore from this IPO.
There are 2.28 crore shares available in the NII category, which is 10% of the total shares available in the IPO.
Comment:
This is the first IPO from Anil Dhirubhai Ambani Group and experts say that at least 100 times subscription is likely in NII category.
Moneycontrol learnt that the grey market premium for the Reliane Power IPO is around Rs 390-400.
Reliance Industries group companies have always delivered value in the past. Retail investors are pooling so that they can take leveraged bets.
If we assume that the IPO has subscribed 100 times in NII category and listing price at Rs 850 then the return for non institutional investors on investment is at 5.7%.
| Investment | Rs lakh | 500,000 |
| Margin funding | X | 20 |
| Gross Amount | Rs lakh | 10,000,000 |
| Interest | % | 15 |
| Interest cost + Other charges | Rs | 59,875 |
| Total money available for investment | Rs lakh | 9,940,125 |
| Issue price | Rs | 450 |
| Application | no of shares | 22,089 |
| Oversubscription | X | 100 |
| Allotment | no. of shares | 221 |
| Listing price | Rs | 850 |
| proft on sale per share | Rs | 400 |
| Profit on sale | Rs | 88,357 |
| Adjusted profit on sale | Rs | 28,482 |
| Return on Investment | % | 5.7 |
But if the subscription increases the return on investment reduces for that investors, which as follows
| Listing price | ||
| Subscription | 850 | 900 |
| 50x | 23.4 | 27.8 |
| 100x | 5.7 | 7.9 |
| 150x | -0.2 | 1.3 |
| 200x | -3.1 | -2 |
By Haresh Soneji with inputs from Moneycontrol.com and CNBC-TV18
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