Reliance Power IPO Analysis

Reliance Power Limited has recently filed its Draft Red Herring
Prospectus (DRHP) with SEBI.

Reliance Power Limited IPO which would be one of the biggest IPO
in Indian stock markets which will issue 130 crore equity shares
of Rs 2 each at a price to be decided later.

The net issue to the public would be 114 crore equity shares
after the promotors contribution of 16 crore equity
shares.Reliance Power IPO will constitute 11.5% of the post issue
paid-up capital of the company and the net issue will constitute
10.1% of the post issue paid-up capital of the company.

UBS is valuing Reliance Power between Rs 71,800-92,100 crore and
says that Reliance Energy’s 50 per cent shareholding in Reliance
Power is worth Rs 35,900-46,100 crore. This translates into
another Rs 1,571-1,995 for every share of Reliance Energy.

Analysts also see big value in the Reliance Power IPO. UBS says
that the cost of capital for Reliance Power would be 20 per cent
less than NTPC. It also believes that the gas supply dispute will
be resolved and sees no single risk to fuel supply.

It also views that Reliance Power is positioned to win upcoming
UMPP projects. However, there are some risks associated with
Reliance Power future business.

UBS says that gas allocation and pricing needs to be monitored
closely and if rules prevent, carbon credit trades from gas-based
plants could affect revenues.

Analysts say share of private sector in power generation will
increase from current 13 per cent to 20 per cent by 2017 and
Reliance Power is all set to grab a big pie out of it as it has
also plans to generate power from nuclear energy.