Reliance Power slumps on debut; IPO appetite dulled

By Hiral Vora

MUMBAI (Reuters) - Shares in India's Reliance Power sank as much as 21 percent in a chaotic debut on Monday as valuation concerns and global market turmoil dented investor demand following its $3 billion IPO, the country's largest.

The poor start for a share that had initially been expected to double was a further setback for India's record pipeline of IPOs this year. Two offerings, including a $1.6 billion one from Emaar MGF Land, were shelved last week after a tepid response triggered by the global credit crunch and U.S. recession worries.

"It will definitely hit investor sentiment in other IPOs as new entrants in the market will think several times before pricing their offer aggressively," said D.D. Sharma, vice president at Anand Rathi Securities.

Reliance Power, controlled by billionaire Anil Ambani, sold out within a minute last month when it opened its record IPO to finance the building of power plants across India.

The offer for around a tenth of the company was priced at 450 rupees ($11.4) a share, the top of range, and the $3 billion raised made it the world's biggest offering so far in 2008, according to Thomson Financial.

Analysts first expected Reliance to touch 900 rupees when it began trading, but stock market turmoil lowered investor risk appetite and analysts subsequently said a start of 75-150 rupees above the IPO price was more realistic.

But after rising briefly to 599.90 rupees, the shares dropped to a low of 355.05 rupees and closed down 17.2 percent at 372.50 rupees. The benchmark index ended nearly 5 percent lower.

Reliance Power was the top traded stock on the Bombay exchange with nearly 64 million shares changing hands.