Power(ful) response to IPO

While the country’s largest IPO basked in overwhelming response from the investors, most of the listed power companies traded at lower prices on Tuesday. Tata Power and power equipment maker Crompton Greaves were exceptions, gaining Rs 14.50 and Rs 13.85, respectively. The BSE Power Index closed at 4,632.37 points, losing 116.39 points, or 2.45 per cent.

Deven Choksey, managing director of KR Choksey Securities, said, “There was much euphoria in the power sector ahead of the Reliance Power IPO which resulted in other power sector stocks running too much and overstretching themselves. Tuesday’s fall in the prices of these stocks is mainly due to profit-booking because of their rich valuations rather than investors reducing their exposure to subscribe to the IPO.”

Reliance Energy plunged Rs 113, or 4.57 per cent, to Rs 2,361 on Tuesday. Other prominent losers in the power sector were Suzlon Energy, which was down by Rs 84.10 or 3.95 per cent at Rs 2,046.25, Bhel, which dipped Rs 58.30 or 2.36 per cent at Rs 2,415.65, Siemens, which lost Rs 42.85 or 2.14 per cent at Rs 1,960.30, and NTPC which decreased Rs 10.95 or 3.84 per cent at Rs 274.

“The fall in the prices of power sector stocks is largely because of their stretched valuations. Otherwise, these stocks would have surged higher, seeing a huge positive response by investors to the RPL IPO,” said Ambareesh Baliga, vice president at Karvy Stock Broking.

Reliance Power has fixed the price band between Rs 405 to Rs 450 and the issue closes on January 18. The issue offers a discount of 5 per cent to retail investors. Retail investors have also been given option to pay only 25 per cent of the total application amount up-front for subscribing to the issue.

The balance will be called upon, after the allotment of partly paid shares.

Anil Ambani and Reliance Energy, promoters of Reliance Power, have brought in their contribution of Rs 1,440 crore at Rs 450 per share.