Financial Management & Corporate Finance Case Study

Case Title:

Reliance ‘Power’ful IPO

Abstract:
This case study was written primarily to understand the Initial Public Offer (IPO) in reference to India's largest public offering by Reliance-Anil Dhirubhai Ambani Group (R-ADAG) through the group's company, Reliance Power Limited (RPL) or Reliance Power to garner $3 billion in January 2008. The company has a biggest pipeline to develop 13 large andmediumsize power projects with the total outlay of $29 billion. In order to finance these projects company came up with the IPO to sell out 260 million shares of INR 10 each at the premium of INR 440 each. The issue got over-subsided by 73 times of shares offered and generated the demand worth more than $196 billion. However, This IPO got one of the worst listing on BSE on the very first day as stock plunged the shareholder's wealth by 17.22%.

This case offers an enriching discussion on pricing and timing of IPO and other issues related to the IPO such as efficacy of book-building process, etc.

Pedagogical Objectives:

• To understand the various methods of raising capital
• To scrutinise the pricing issue involved in public offering and highlight the difference between public issue and private placement
• To understand the public offering in the Indian context and bring out the pros and cons of raising capital via IPO

Keywords : IPO; Initial Public Offering; Bidding strategy; SEBI; Paid-up capital; Bonus shares; MBA; Finance for Managers; Managerial Finance; Financial Management; Principles of Financial Management; Business Finance; Corporate Finance; Financial Management Course Case Pack; Course Case Maps; Course Case Packs; Financial Management Course Case