After the debacle of Reliance Power at the bourses, the way price discovery has been done through the book-building process will henceforth be questioned by retail investors who are typically not used to booking losses, and that too from the house of Ambanis, who, they believe, will never let them down.
The quota fixation for the QIB, which is believed to bring in a sense of measured valuation for new issues in an increasingly globalising economy, has been belied. QIBs, by their recent actions, have proved that they are not long-term investors but in for a quick buck.
The rating agency which gave the Reliance Power issue a Grade of 5 has derated itself.
The phenomenal over-subscription at the IPO counter quickly dried out and evaporated.
No demand was seen for the scrip on listing. The grey market which is functional has added to the distortion.
As reported in some sections of the press, this market was till recently competing with the registered exchanges! It is now apparent to the naive investors, how uncertain the entire process of IPO issue can be and that the gullible can easily be led down the garden path. It was a hasty exit for the member of the Ambani family at the listing quickly followed by the who is who of investment bankers.
On price issue, Reliance Power pales in comparison with its peer NTPC. Having said that, one cannot, of course, wish away the phenomenal clout and competence of the ADAG group to bring in value to the shareholder, and quickly.
Whether they bring it in by aggressive and open means, such as extending support to their stock or through innovative demerger, or merger of assets they hold amongst their various holdings including that of Reliance Capital remains to be seen.
For the sake of the retail investor and the public at large, it is hoped ADAG group acts quickly.
