Ambani Power Play

reliance_power.pngAnil Ambani is at it again with his “unlocking value” theme with his various holdings. Reliance Power when it IPO’s in Feb 2008 will be the largest Indian IPO ever at USD 3 billion. The company will be valued at USD 10 billion when it lists at the upper end of the offering price of Rs. 450 (USD 11.25, based on Rs 40 = USD 1).

Reliance Power is planning to go after the power generation and distribution market which the gov’t of India is looking to spend USD 200 billion. If the gov’t actually spends the money remains to be seen. The government estimates it will invest around USD 500 billion over five years for enhancements in infrastructure like roads, ports and power. The numbers being thrown around these days from the gov’t of India sometimes makes me wonder if they are confusing millions with billions.

So what has Reliance Power done so far…not much. I looked through the monstrous 350+ page red herring document which contains some gems in it:

– “For fiscal year 2007, we generated revenues of Rs. 39.3 million (USD 1 million) . The sources of these revenues were Rs. 22.5 million from project construction and supervision services and Rs. 16.8 million from mutual fund investments.”

– “In September 2007, we entered into a brand licensing agreement with ADAV, allowing us to use the logo for our services and products for Rs. 800 million (USD 20 million).” Yup, that logo at the top of the post is worth a cool 20 million. And who is ADAV? That would be Anil Dhirubhai Ambani Ventures Private Limited – which is 100% owned by Anil and family.

Lastly, credit rating agencies CRISIL and ICRA have given 4/5 for the issue indicating above average fundamentals. My question is what fundamentals are they looking at?

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