Reliance Power IPO which is like the darling of the IPO market now is the only thing that is spoken all over the place , I can see huge income to brokerage house because i have heard almost all the people saying i want to apply for the IPO and they dont have an DEMAT Account and they are trying to open a account before jan 18th 2007.There are lot of question that has arised out of the two payment options , i just went through the whole RHP document and im trying to give some answers to questions that i have asked myself .
RHP Filed by Reliance Power today with Sebi – Download here ( its 4 mb pdf , Do right click and save it to local machine )
When is the IPO opening ?
IPO opening on Jan 15th 2008 and closing on Jan 18th 2008 , just 4 days of availability
whats the Retail side of the issue
Net Issue to the Public 228,000,000 Of which Retail Portion 68,400,000
What will be the Price ?
its 405 to 450 Rs
Is there Discount for IPO ?
As im concetrating only on the retailers yes for retailers thay have promised 5 percent discount, which will be reflected on the final offer price when we get the allotment .
what is the lot size ?
Whats the max Retailers can apply for?
With the limit of 1 lac and not more than that for retailers its 225 stocks which is the max bid they can apply for and min bid of 15 stocks. I know you will do the math of multiplying it with 450 and say it exceeds the price , but you guys need to put in the5 percent discount if you take into picture that dicsount then 225 is the max we can apply for .
Some lines from the RHP on this .
” The Bid must be for a minimum of 15 Equity Shares and in multiples of 15 Equity Share thereafter, so as to ensure that the total Bid Amount (including revision of Bids, if any) payable by the Bidder does not exceed Rs. 100,000, net of Retail Discount. At the Cut-off Price, the maximum number of Equity Shares that can be Bid for by Retail Individual Bidders is 225. (Investors may note that Total Bid amount is not just the amount payable at application but the entire amount payable for the bid including the amount payable by Due Date for Balance Amount Payable) In case of revision of Bids, the Retail Individual Bidders have to ensure that the Bid Amount does not exceed Rs. 100,000. In case the Bid Amount is over Rs. 100,000 due to revision of the Bid or revision of the Price Band or on exercise of option to bid at Cut-off Price, the Bid would be considered for allocation under the Non-Institutional Portion. The option to Bid at Cut-off Price is an option given only to the Retail Individual Bidders indicating their agreement to Bid and
subscribe to Equity Shares at the final Issue Price as determined at the end of the Book Building Process. “
What are the Payment Options ?
There are two payment options for retailers
Amount Payable on Submission of Bid-cum-Application Form in case of Retail Individual Bidders and Non-Institutional Bidders, is Rs. 115.0 per Equity Share, such that it shall not be less than 25% of the Issue Price and Balance Amount Payable shall be paid by the Due Date for Balance Amount Payable. All Non Resident Bidders availing the option of Payment Method-1 are required to submit a copy of an approval from the RBI allowing them to subscribe to the partly-paid up Equity Shares. Under Payment Method – 1, out of the Amount
Payable on Submission of Bid-cum-Application Form, Rs. 2.5 is towards face value and Rs. 112.5 is towards premium.
Amount Payable on Submission of Bid-cum-Application Form in case of Retail Individual Bidders and Non-Institutional Bidders shall be 100% of Bid less the Retail Discount .
Make it plain simple there is one payment way where you need to pay only 25 percent that is 115 rs * 225 lot if you applying for full applicable lot of value 1 lac. and there is another payment method where you can just pay all the amount and not just 25 percent .
>> There will be no preference if you pay by method 1 or 2
>> Advantage with Payment method 2 is it get alloted to you on allotment day as fully paid stock but in payment 1 its only partially paid which get converted to fully paid after Allotment plus 28 days or so after you pay the remaining amount and the process getting over , so you cant sell it immdtly in payment 1 and you can sell it on the listing day in payment 2.
>> But in payment 1 if the ipo is fully subscribed and it would be more than full subscription then you will not get full allotment and you are given only half the lot applied or less than that , Then reliance power has the right to take the full amount for the lot alloted and if its within the 25 percent amount you had paid they will take the amount and they will send the remaining money to us , that way its advantageous for us that the stocks come as fully paid stock but just lesser quantity .
>>With this IPO this famous for sure this will get fully subscribed and may be even 15 times on the retail side then we will get only 1 lot each and will come to us as fully paid stock and we can get the remaining money back and we can sell the stock if we want on the first day .
My final Conclusion on the payment option is Payment 1 which is 25 percent payment now and remaining on allotment is good so you can use remaining fund for some other IPO.