Did R-Power fail investors or is global volatility to blame?

Would it be fair to say that Reliance Power failed to live up to investor expectations when the secondary market was already troubled by global volatility?

Even before the Indian market opened, Hong Kong's Hang Seng was down 1.59 per cent and Singapore's Straits Times lower by 1.37 per cent on concerns over the global economy's health. Japan, China and Taiwan remained closed for public holidays.

Making the situation worse for the company was the withdrawal of IPOs by Wockhardt Hospitals and Emaar MGF Land late last week.

The Reliance Power IPO, the first from the Anil Dhirubhai Ambani Group after the demerger, had its share of distracters during the issue period itself, with questions being raised about the valuation.

Coming from the ADAG stable, the IPO had built high expectations amongst investors on its listing. In fact, even before the issue opened the grey market premium was Rs 450 to the price band of Rs 405-450 per share.

No wonder then that Reliance Power faced immense odds as it listed on Monday. On the BSE, the share opened at Rs 547.80 and on NSE at Rs 530 to the issue price of Rs 450 (Rs 430 to retail investors who got a discount of Rs 20 per share).

"This is not surprising because the global market scenario has affected this IPO, which is its latest casualty," said Jigar Shah at KIM ENG Securities India.

Intraday the counter saw a high of Rs 599.90 and low of Rs 355.05, before settling at Rs 372.50 on BSE, a discount of 17.2 per cent. The counter clocked a volume of 6.38 crore shares.

On NSE the stock closed at Rs 372.30, after slipping to a low of Rs 355.30. The high was Rs 530. Volume traded was 13.43 crore shares.

“There was a lot of hype on Reliance Power IPO well before the issue. Talks of 100 per cent premium in the grey market attracted speculators to the issue, subscribing it heavily. However, prevailing market sentiment has hit the stock adversely. Reliance Power may settle around Rs 450-500,” said a market analyst.

Expectations of subdued start in Europe as French bank Societe Generale launched a rights issue at a steep discount and announced 600 million euros in fresh write-downs further weighed on market sentiment.

The unsympathetic treatment by investors to the stock saw the market plumb lows.

The BSE Sensex lost 1,007 points or 5.76 per cent at the day’s low of 16,457.74 and NSE’s Nifty declined 316.75 points or 6.19 per cent when it fell to a low of 4803.60.

In the F&O segment on NSE, Reliance Power February futures closed at Rs 375, a premium of Rs 2.7 to the spot close. The contract opened at Rs 410, rising to a high of Rs 452.70 while the low was Rs 357.10. Number of contracts traded was 84,185 and turnover Rs 1549.04 crore. Open interest was 48,15,450.

Shares of parent company Reliance Energy also got a severe drubbing. The stock ended down 19.40 per cent at Rs 1,582.30. The low was Rs 1,515.

Other ADAG companies also ended lower. Reliance Communications lost 5.3 per cent, Reliance Natural Resources fell 9.1 per cent.