I hope that the Reliance Power (RP) listing below the offer prices will put some sense in to the heads of small investor and they will understand that investing in IPOs is not a guarantee of huge profits.

A majority of the public thought that the stock would list at double the offer price and they would make a quick buck. To apply for the issue many people sold shares, took loans and even withdrew money from PPF accounts. It sucked out liquidity from the market resulting in a fall.

No one looked at the fundamentals of the company. Power sector is capital intensive and the gestation period is long. RP only has a stack of MOUs to set up projects and is not even sure of where its raw material would come from. The stock was not worth even at half its offer price.

It is surprising that the regulators could allow such a hugely over priced issue to come in the market when the norms for companies wishing to float stock is that they should have made consistent profit for 3 years. It has cast a shadow over IPOs of genuinely good companies.

Anil Ambani brought this issue to show his one-up-man-ship to his elder brother that if Mukesh was big, Anil could be bigger. In the process, he has only dented his group’s image.

“Fast climbers down soon fall” and “there is no elevator to the top, you have to take the stairs”.