IPO Rocket.com

Camille asks:

New Delhi, It is not mere coincidence that the Bombay Stock Exchange catapulted

the Ambanis as the world’s richest having market capitalization of $

91 billion. This is certainly a moment of great pride for the nation

that was not too long back known as a land of snake charmers.

While the credit for changing the image goes to the IT sector, the

booming economy and with it the skyrocketing equity market, is doing

more than its bit to take the flying tricolour higher.

The latest bull run has seen the Sensex register 1000 point rise once

in 6 days and another as much rise in 2 days. The credit for the

spectacular rise goes largely to the ‘Reliance pack’— companies

belonging to the Mukesh and Anil Ambani group companies.ket

However, there’s more to it than meets the bull’s eye, pun intended.

While nobody can dispute a promoter’s desire to cash in on the booming

market, the way Anil Ambani has sought to ride roughshod over investor

interest may not pass muster with the capital market regulator

Securities and Exchange Board of India.

The case relates to the proposed initial public offering of his group

company and Reliance Energy Ltd.’s subsidiary, Reliance Power Ltd..

The company has already filed draft red herring prospectus with Sebi.

From the documents submitted to the regulator, one can clearly see

that Anil is trying to make personal gains at the cost of would be

investors of Reliance Power and the current shareholders of Reliance

Energy.

The DRHP says that Reliance Power is owned 50% by private companies of

Anil Ambani and the balance by Reliance Energy. Anil has contributed

10 bln rupees for his 50% stake.

The company is expected to raise 80 bln rupees via its 1.3-bln-share

IPO with the face value of each share being 2 rupees. Therefore, the

expected issue price per share is seen around 60 rupees.

At the issue price of 60 rupees, Reliance Power is worth 700 bln

rupees and Anil Ambani’s stake at 350 bln rupees, which has been

acquired for merely 10 bln rupees!

Also, according to clause 3.7.1 (i) of Sebi guidelines, a company

cannot make a public issue of 2 rupees face value share at a price

less than 500 rupees each.

Hence, in case Reliance Power issues the shares at a price of 500

rupees per share, Anil Ambani will gain upwards of 550 bln rupees at

the expense of future shareholders of Reliance Power.

What is also puzzling is why the group has ignored the 78-year-old

Reliance Energy for executing the prestigious ultra mega power

projects in the country.

Reliance Energy has been forced to transfer its huge resources in

terms of manpower and technical expertise to Reliance Power for the

UMPPs. The only argument that seems logical here is the personal gain

of Anil Ambani.

Little surprise. Sh Silvius Condapan, MP Rajya Sabha and Sh Baleshwar

Yadav, MP Lok Sabha have written to the Central Vigilance

Commissioner, the Finance Minister and to Sh. Prem Chand Gupta,

Minister for Corporate Affairs complaining against this malpractice.