RPower gets nod to alter IPO terms

The ADAG-promoted Reliance Power has received the approval of shareholders for varying the utilisation of the proceeds from its initial public offer (IPO) made in January 2008 raising approximately Rs 11,700 crore. On Thursday, the company informed the National Stock Exchange that the members of the company “have by Postal Ballot pursuant to Section 192A of the Companies Act, 1956, read with the Companies (Passing Resolution by Postal Ballot) Rules, 2001, passed all the resolutions with over 99.9% majority.” The promoter and promoter group had a stake of 84.78% in the company as at the end of June 2010.

Reliance Power had sought approval to “vary the terms referred in the company’s prospectus dated January 19, 2008, including to vary and/or revise the utilisation of the proceeds of the initial public offering of equity shares made in pursuance of the said prospectus for purposes other than those mentioned in the prospectus, namely for the general corporate purposes including, but not limited to funding of subsidiaries to part finance the construction, development and commissioning costs of the proposed projects namely 3,960-mw Krishnapatnam ultra-mega power project, and 3,960 mw Chitrangi power project.”

Meanwhile, a recent Bloomberg report, released on August 2, 2010, quoted Macquarie Equities Research as saying that the company has spent 52% of the cash with little progress on its ventures. “Half of IPO proceeds have been spent, yet we’re still some way from execution of Reliance Power’s major power projects,” Mumbai-based analyst Jeff Evans said in a note to clients. “The bulk of money spent in the last two quarters hasn’t been on the five electricity generation projects highlighted in the company’s prospectus, the note said.

Macquarie cited risks to the growth prospects and coal assets underpinning Reliance Power’s value, saying it may face hurdles securing natural gas supplies and developing its 2 billion metric tonne of coal reserves with no experience in mining. “Similar to the initial euphoria of its power portfolio, we prefer to wait for some proof of execution before paying for all of the upside,” of its coal resource, the note said. “We can’t justify the current market value of the stock considering the ongoing risk around execution.” Macquarie retained its rating for Reliance Power as “underperform.”

Meanwhile, Reliance Power plans to make a QIP (qualified institutional placement) of up to 15% of the equity share capital of the company. Moreover, it also plansto issue shares of up to 10% of the equity capital of the company in the international market....