Crisil gives 4/5 rating to Rel Power IPO

Crisil gives 4/5 rating to Rel Power IPO

Rating agency Crisil has assigned an above average rating to the proposed initial public offering (IPO) of the Anil Ambani group firm Reliance Power that is estimated to raise up to $3 billion.

Crisil's 'four-on-five' grade indicates that the fundamentals of the issue are above average in relation to other listed equities in India.

"...strong demand for power will catalyse regulatory facilitation for private participation in the power sector over the medium- to long-term. In this scenario, early movers like Reliance Power will benefit from attractive business opportunities that are likely to come about as a result," Crisil said in a statement.

Reliance Power filed the draft prospectus for its IPO in the first week of October. The IPO is understood to have secured the nod of Securities and Exchange Board of India. The company proposes to issue 130 crore equity shares.

Crisil grades IPOs on a scale of one to five. Grade one indicates poor fundamentals, while five-on-five is given to an issue with strong fundamentals.

The agency also said power generators in India will have to depend on state electricity boards for offtake over the short-to-medium term and their return will be subject to regulatory oversight in case of tariff-based projects.

Also, returns on the projects won through the competitive bidding route may not be substantially higher due to competition. Reliance Power has bagged two of the three ultra mega power projects awarded by the government so far.

Besides Reliance, recent IPOs of software services firm Persistent Systems, steel pipe maker Precision Pipes and Profiles Company, and brokerage firm Edelweiss Capital have been assigned 'four-on-five' grade by Crisil.