Dynamics of De-Merging

The Forbes list of the wealthiest people on the planet is out. Alright the whole world knows about this now. Warren Buffet, with a net worth of $62 billion dethrones Bill Gates as the richest man in the world. Bill Gates himself couldn’t care much or would he. May be not the rate at which he is donating money. It’s best answered by him.

The question is, can we have a new number one soon? Who can dethrone Mr. Buffet? We can certainly take pride on the fact that we have 4 Indians on the list, Lakshmi Mittal courtesy his Indian passport, the richest. The Ambani brothers are 4^th and 5^th with net worth’s of $50 and $48 billion. Put together $98 billion dollars and Mr. Buffet’s fortune seems a far cry from that of the two Ambani brothers. If these two brothers get together, which is highly hypothetical, Warren Buffet would get dethroned. It would take some while before someone over takes the Ambani brothers. Considering the fact that the Reliance demerger was announced not so long ago that’s a mind boggling amount of wealth created in about 2 years. January 17, 2006 was the last day when the Reliance stock traded on the bourses after which it was split into various businesses.

The two stocks which traded already, have got revalued - Reliance Capital and Reliance Energy. Save for the recent fall in the markets listed companies from both the camps have made investors and promoters alike, rich to a great extent. One could not think of this before demerger, may be only Mr. Mukesh Ambani would have been picture perfect on the Forbes list. While from a family perspective not the best of things to happen, kudos to both the brothers for master minding this.

While all things considered, it remains to be seen how much our Indians contribute to philanthropic deeds as compared to Bill Gates and Warren Buffet.

Read here: Appreciation for our Indian billionaires.

Reliance Power and a frivolous excuse

Reliance Power today came out saying that global factors were to blame for it's IPO listing so terribly. Is it really so? It seems that the promoters have gone too far with their optimistic pricing and have been victims of their own game. Deep analysis shows that promoters after all have made money already and retail investors are left in the lurch.

By going through some reports about their current and projected capacities, NTPC seems to be available at a really cheap market price. How does one justify the excuse given as "global factors" when all of them or atleast most of the future projects are going to be based in India. So it seems not only they factored reasons core to their future plans but buoyancy in our capital markets rake in some moolah. Surely lot of the investors got allured by the Reliance brand name and especially a lot of them who got their demat accounts opened only for this IPO. This will not go well with the first time investors and create a general negative sentiment regarding the Reliance pack among these people.

Are the promoters only to blame for this? Reliance Power has for sure consulted the bankers before coming out with this issue. It depends upon the bankers to come up with a fair price for the Reliance Power IPO. Do they really feel that was a fair price band based on the company's growth prospectus keeping in mind the domestic focus, then why blame global factors.

Credit has to be given to the promoters about marketing the issue well for the retail investors. A discount on the upper limit and full payment not being required at the time of subscription. Oh yeah, that's sweet, it was for me too.

One hard truth is, a lot of investors have lost money and hopefully the ADAG group gives us some reasons to cheer in the future.