28 January 2013

Déjà Vu?? Reliance Power (2008) & NTPC (2013)

As soon as we read this, we had a feeling of Déjà vu…

Déjà vu, according to Wikipedia, is the phenomenon of having the strong sensation that an event or experience currently being experienced had been experienced in the past.

You must be wondering why? The reason is…

2008 – Reliance Power’s IPO – About 2 Billion Dollars – Sensex near All Time High

2013 – NTPC’s Offer For Sale – About 2 Billion Dollars – Sensex near All Time High

Power Stocks : Deja Vu??

Striking similarities, isn’t it? Both companies belong to power sector, both are coming out with almost equal offer sizes and markets in both cases are trading near all time highs.
But similarities end here and there are some marked differences too:
  • In 2008 (Jan-Feb), Sensex was trading at multiples of 24x. As of today (Jan-Feb 2013), Sensex is closer to 19x.
  • Reliance Power did not have any assets at the time of IPO (2008). On the other hand, NTPC (2013) has an installed capacity of about 40,000 MWs.
We should pray that similarities end here itself. This is because if what happened after RPower’s IPO (Great Crash of 2008-09) gets repeated in 2013, once again there would be massive erosion of investor’s wealth and confidence.

Disclosures: No positions in Reliance Power or NTPC.

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4 comments:

  1. philip9876.com29 January 2013 12:38

    a bit of correction is better. the market has run up too much. it will give us options to buys some good companies at cheaper prices.

    ReplyDelete
  2. @ae7a067f6150aae4cf74497821ddaa95:disqus

    Ofcourse. We would love if markets corrected in near future. This, as you rightly pointed out, would give us great opportunity to buy some great stocks at reasonable valuations.
    So,
    Let there be a correction. Amen. :-)

    ReplyDelete
  3. there type of mega IPO sucks liquidity from mkt

    ReplyDelete
  4. @kedu

    True. Mega IPOs do remove liquidity from markets.

    ReplyDelete

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