Thursday 17 January 2008

Broking houses advise caution on Reliance Power issue

Never mix business with pleasure, goes the saying. And that is just what the broking fraternity did. Notwithstanding the bonhomie evident at the company’s brokers’ meet, brokerages appear to have dug their heels in, crying “caution” on the ongoing Reliance Power issue. A far cry from when ‘mere papa ka sapna,’ and every mention of the word ‘Reliance’ was met with applause.

The reports on REL Power come with a caveat, with one even recommending an “avoid”. The bottomline being “subscribe for listing gains”. Most brokerages have identified absence of operating history, implementation delays, long gestation period, fuel availability and expensive valuation as the key concerns.

So, even as Emkay has advised its clients to “subscribe for listing gains”, Religare said “investors can subscribe to the IPO purely on the promoter group’s track record and execution capabilities”. It is reasonable to assume gains on listing, it goes on to add. Indian Capital Markets has also advised its clients to subscribe to the issue only to cash in on listing gains. But that’s not all. Equitymaster has come out with an ‘avoid’ citing execution risks and expensive valuations as some of the many reasons.

According to Emkay, unavailability of fuel could be a simmering issue. “Most of the projects do not have coal linkages, while availability of gas is not yet certain,” it says. The brokerage is also of the view that implementation delays are one of the biggest risks for the company. “We recommend investors to subscribe with the objective of booking listing gains in this stock,” sums the report.

Incidentally, the market has already been abuzz with talk that most retail investors are leveraging to invest in the issue, only to exit on day one. If the grey market premium is anything to go by, then investors are certainly expecting the stock to list at around Rs 900 levels.

via ET