Sunday, February 3, 2008

Power unleashed!!

The common man is indispensable to India's growth story

Sometime back I came across an article, wherein it was stated that the Waltons of USA are the richest family in the world; their combined wealth stood a little over USD 70 billion. The article also stated that had the Ambani brothers remained together, their combined wealth would have been around USD 90 billion! Since that is not the case, the Waltons remain by far the richest family in the world. But then it is interesting to observe the manner in which things are shaping up; forget family bonding, in no time, either of the brothers is likely to surpass the Waltons to become the richest in the world. The recent Reliance Power IPO is just a glimpse of the shape of things to come for the Ambanis, though this time more in favour of Anil, the younger of the two brothers.

The recently concluded Reliance Power IPO, from the Anil Dhirubhai Ambani Group, created history of sorts. The success of the IPO can be gauged from the fact that the entire issue (26 million equity shares worth USD 2.9 billion) was oversubscribed in the first 60 seconds!! That’s not all, by the end of the fourth and the last day, against USD 2.9 billion, Reliance Power got oversubscribed by 73 times, mopping a staggering USD 180 billion. To put it in perspective, it is almost 20% of India’s current GDP, it is the combined market capitalisation of all the companies listed in Portugal and Czech Republic (as per Bloomberg), or for that matter, it is the sum total of the subscription demand generated by five largest IPOs in India – Mudhra Port & SEZ, Power Grid, Reliance Petroleum, Idea Cellular and Power Finance Corporation. This also means that if Anil Ambani could mop up the entire subscription money then by the virtue of Reliance Power itself, he alone would have been three times as large as the Walton family!!

So what makes Anil Ambani’s power project so special that it received such an overwhelming response? (It becomes all the more intriguing to understand and analyse this response simply because, of the six power stations that the company plans to build with the money, only the one in Madhya Pradesh seems to have both demand and supply in place. For the rest five, buyers have yet to be secured and supplies to be streamlined). Perhaps the answer is to be found in the manner in which Anil Ambani has been able to make this issue ‘retail friendly’ by declaring innovative schemes. Not only are retail investors given a subsidy of Rs 20 per share, but along with that they could pay a fraction of the issue price on application, paying the rest on allotment. Net result: The retail investor’s quota was oversubscribed by 15 times, generating almost Rs 50,000 crores (i.e. 25% of our direct tax collection this year) by more than 5 million retail investors (which is more than half of the total demat account holders of the country).

Like his father, the late Dhirubhai, Anil too has been successful in unleashing the power of the retail investor or the common man. It is no secret, that it is the common Indian, who both as a consumer and a stakeholder would drive India Inc. to the next level and relegate the Waltons, the Gates and the Buffets to the pages in history!!


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