Monday, 11 February, 2008

Leveraged HNIs lose money

Reliance Power: Research Analyst Haresh Soneji has come up with a report on the HNI category which are leveraged in the Reliance Power IPO.

The initial subscription in HNI category was 190x while final subscription was 160x. Some subscription were withdrawn due to bad market. Anything over the allotment price is profit. However, there is one positive sign that non leveraged HNIs usually hold the stock.

Leveraged HNIs play the flipping game. 70-80% HNI demand is purely leveraged. They started selling on listing, however, the deals took some time to execute indicating supply pressure.

Many HNIs could execute deals at Rs 400-440. The interest cost is Rs 140 per share, the break even is Rs 590 per share and loss per share is Rs 150-190. The loss is calculated at 8-12% of capital invested.