Mumbai: The board of Reliance Energy Ltd (REL) formally approved an initial public offering (IPO) of shares in Reliance Power Ltd that is likely to be about $3.5 billion, or Rs13,895 crore at current exchange rates, for a 30% floatation.
“Reliance Power is pursuing various gas, coal and hydro power generation projects in different parts of the country. The proposed IPO is being undertaken to fund the development of the said power projects,” according to a company statement issued on Sunday.
Reliance Power will soon file the draft red herring prospectus with market regulator Securities and Exchange Board of India, the release said. If it happens as anticipated, the issue could become India’s largest IPO, ahead of a recent offering by real estate company DLF Ltd. Reliance Energy is led by billionaire businessman Anil Ambani.
Shares of Reliance Energy rose about 8% on Friday after company officials anonymously told several newspapers details of what was in the offing on Sunday.
In addition to publicly stated projects of 20,000MW of power generation, the company official, who did not wish to be named, added Reliance Power has also lined up generation plans for another 5,000MW.
Reliance Power recently won the bid to develop a 4,000MW ultra mega power project in Sasan in Madhya Pradesh, with an estimated cost of around Rs20,000 crore. It is part of India’s ambitious effort to develop a string of so-called ultra mega power plants.
Kotak Mahindra Capital Co. and the local unit of JPMorgan Chase & Co. are the investment bankers involved in the proposed share sale process.
The IPO move is also believed to be the first step towards restructuring Reliance Energy into three business divisions—power, real estate and infrastructure. Reliance officials, who didn’t want to be identified, claimed that other divisions could be separately listed in the future.