With Reliance Power IPO, Anil takes a step towards restructuring Reliance Energy It was a relaxed Sunday afternoon for many. But, for Anil Ambani, 
Chairman, ADAG it wasn’t the same. The man seemed quite fervent as he formally kicked off India’s biggest-ever initial public offer (IPO) to mop up Rs.117 billon (leaving behind DLF’s float of Rs.91.87 billion) by Reliance Power Ltd. (RPL). And why not? As RPL (a 51% subsidiary of Reliance Energy) lists on the bourses in February, Anil has a fair chance to topple brother Mukesh to become the richest Indian (his 44% holding in RPL valued at $11 billion could spurt his wealth to $54 billion) and ADAG, the second largest group in India in terms of market cap.
Well, Anil has all reasons for his gusto, but what about investors going gung ho over the IPO? Isn’t that too optimistic on their part for a company with no operating history in power generation? Moreover, with the first of its 13 projects to go on stream by December 2009, is it worth waiting that long? Further, its reliance on RNRL (currently in litigation with RIL for gas supply) & other group affiliates, for the supply of fuel as well as ancillary support services makes the business proposition riskier. So, will this not impact performance of those nine projects that are either fired by coal or gas?
S. Mukherjee, CEO and MD, ICICI Securities (consultants to RIL on the IPO) disagrees, “The issue is not of owning reserves but of the availability of reserves, which are there in plenty. So, I don’t see much of a problem on the issue.” Moreover, with cash flowing in, the company is now also looking at acquiring coal mines in Indonesia, Australia and South Africa to overcome domestic problems. In fact, several other industry experts see big value in RPL. According to UBS, cost of capital for RPL would be 20% less than the state-run giant NTPC – which implies cheaper power too. And a whopping $28 billion investment in 13 medium & large sized power projects with total capacity of 28,200 MW makes it the largest development pipeline in India so far.
Having said that, it’s an uncertain bet for shareholders right now, with only the Reliance track record inspiring some confidence. Anil’s words appear ominous when he says, “No one is born an industrialist... even my father’s abilities were doubted when he went about setting the Jamnagar refinery.” Well, one thing is for sure, if it was about relying on a precedent, he couldn’t have come up with a better one!
Chairman, ADAG it wasn’t the same. The man seemed quite fervent as he formally kicked off India’s biggest-ever initial public offer (IPO) to mop up Rs.117 billon (leaving behind DLF’s float of Rs.91.87 billion) by Reliance Power Ltd. (RPL). And why not? As RPL (a 51% subsidiary of Reliance Energy) lists on the bourses in February, Anil has a fair chance to topple brother Mukesh to become the richest Indian (his 44% holding in RPL valued at $11 billion could spurt his wealth to $54 billion) and ADAG, the second largest group in India in terms of market cap.Well, Anil has all reasons for his gusto, but what about investors going gung ho over the IPO? Isn’t that too optimistic on their part for a company with no operating history in power generation? Moreover, with the first of its 13 projects to go on stream by December 2009, is it worth waiting that long? Further, its reliance on RNRL (currently in litigation with RIL for gas supply) & other group affiliates, for the supply of fuel as well as ancillary support services makes the business proposition riskier. So, will this not impact performance of those nine projects that are either fired by coal or gas?
S. Mukherjee, CEO and MD, ICICI Securities (consultants to RIL on the IPO) disagrees, “The issue is not of owning reserves but of the availability of reserves, which are there in plenty. So, I don’t see much of a problem on the issue.” Moreover, with cash flowing in, the company is now also looking at acquiring coal mines in Indonesia, Australia and South Africa to overcome domestic problems. In fact, several other industry experts see big value in RPL. According to UBS, cost of capital for RPL would be 20% less than the state-run giant NTPC – which implies cheaper power too. And a whopping $28 billion investment in 13 medium & large sized power projects with total capacity of 28,200 MW makes it the largest development pipeline in India so far.
Having said that, it’s an uncertain bet for shareholders right now, with only the Reliance track record inspiring some confidence. Anil’s words appear ominous when he says, “No one is born an industrialist... even my father’s abilities were doubted when he went about setting the Jamnagar refinery.” Well, one thing is for sure, if it was about relying on a precedent, he couldn’t have come up with a better one!
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