10 years of Reliance Energy itemizing: How Rs 10,000 turned Rs 1,600

Massive names are not any assure of massive returns, nor the basic inventory logic that infrastructure is all the time a secure guess.

A decade after a list that made holes in lots of traders’ pocket, it’s time to wash outdated wounds, however for good, for revisiting the teachings the frenzy-filled infrastructure IPO – Reliance Energy — taught us all.   

On the again of large demand, the problem value for the Anil Ambani-owned Reliance Energy IPO was fastened on the higher band of Rs 450 for non-retail, and Rs 430 for retail traders.

The problem was offered out inside the first minute of its opening on January 15, 2008, a document for a mega providing of Rs 11,563 crore. The IPO had acquired a document over 50 lakh bids price Rs 7.5 lakh crore, and the problem received subscribed by greater than 72 instances.

The inventory made its debut on the bourses on February 11, 2008. It could have briefly rallied to Rs 599 on the itemizing day, however ultimately settled the day at Rs 372, down 17% from the problem value. The corporate tried to assuage traders’ nerves by providing bonus shares in 3:5 ratio, however solely to make issues worse.

Ex-bonus, the problem value of Rs 430 for retail traders become Rs 269, and Rs 450 for non-retail was price simply Rs 289. 

By no means has the inventory gone above its challenge value till right now. In November 2017, the inventory made a contemporary low of Rs 35. On Friday, the inventory settled at Rs 44, a whopping 84% fall from the adjusted challenge value of Rs 269 for retail traders.

That stated, in case you had invested Rs 10,000 in Reliance Energy IPO, and held it to today, you’d have left with simply Rs 1,636.

Whereas many shares might need fallen from grace on Dalal Road, however what units Reliance Energy aside is the robust optimism that surrounded the IPO on the time of its launch. From autowallahs, rickshawallahs, to HNIs and international traders, individuals got here in droves to put money into the IPO. File demat accounts have been opened throughout that interval. Just a few offered out their whole portfolio, whereas some borrowed cash to purchase models within the IPO, however all in useless!

Secure to say those that didn’t obtain any share regardless of bidding have been the true winners of the RPower itemizing, in any other case solely a handful managed to exit their positions at an honest revenue.

Onerous to say if the bear carnage adopted by the subprime disaster within the US or the corporate’s personal fundamentals, or each, triggered the steep fall, however the truth that the inventory by no means turned worthwhile in all these years tells you the way collective knowledge can usually be grossly improper.

Zee Enterprise spoke to Basant Maheshwari of Basant Maheshwari Wealth Advisors and Deepak Jasani of HDFC Securities to checklist out the cardinal guidelines of IPO investing that one ought to all the time observe:

1) No substitute to high quality

Maheshwari believes it was not in regards to the IPO coming at a nasty time, however individuals’s strategy in the direction of shopping for an organization with out judging its fundamentals or the enterprise mannequin it’s in.

“Individuals should purchase greatest firms within the worst of time and the worst firms in one of the best of time,” he stated.  

Jasani additionally stated that Enterprise is extra necessary than the model identify.

2) Keep away from herd mentality

Keep away from herd mentality and watch out for the truth that bull markets (as do bear markets) don’t final eternally.

3) Tread, or relatively commerce with warning in over-regulated sectors

Watch out for mega enlargement plans resulting in bold capability in dawn sectors the place the traders are nonetheless grappling with demand-supply dynamics and valuation parameters. Giving excessive valuations to sectors vulnerable to govt-regulation may be difficult.

4) Don’t catch a falling knife

Attempting to common or catching a falling knife may be harmful, as is clear within the case of RPower.

 5) Don’t observe large guys blindly

Blindly following establishments may be dangerous for retail and HNI traders as their return expectations, return durations, measurement parameters and risk-bearing capability may be vastly completely different.  

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