Herd Instinct for Reliance Power Limited – IPO January 9, 2008

Good to see you guys looking forward to Reliance Power Limited’s IPO. But wait a minute!

If I show you something, you will, definitely, for a moment hesitate going forward and investing in Reliance Power Limited’s (RPL) Initial public offering (IPO). Why?   Certain complaints have been filed against the Company (RPL) and an appeal has been filed before theSecurities Appellate Tribunal in relation to the IPO  There are certain criminal proceedings pending against the Promoter and Chairman, Mr. Anil Dhirubhai Ambani. Few are given below: There are three cases filed where complainants have alleged forgery and cheating against Mr. Anil Dhirubhai Ambani and RCOM as they continue to receive bills from RCOM even though they do not own a phone connection. There are two criminal cases filed by two holders of convertible debentures alleging false statements in the prospectus pertaining to the issue of such convertible debentures by the erstwhile Reliance Polypropylene Limited.  The Company, RPL does not have an operating history, so it is difficult to estimate it’s future performance.  RPL cannot assure you that their power projects will commence operations as expected.  RPL may not be able to successfully conduct mining operations to extract coal for their Sasan project.  The company does not own “Reliance Power” trademarks, and their ability to use these trademarks,names and logos may be impaired.  The RPL management will have significant flexibility in applying the proceeds received from the Issue.  There were shortfalls in the performance of one of our Promoters and one of our Promoter Groupcompanies when compared to the promises made in its last public issue.  One of our Directors, Mr. J.L. Bajaj, was a director of a company which appears in the defaulters list maintained by the Reserve Bank of India.  There is no guarantee that the Equity Shares will be listed on the BSE and the NSE in a timely manner or at all.  To see the complete details of above risks and other risks, refer Red Herring Prospectus of Reliance Power Limited dated January 1 2008.  Please note:  The company has done its best to mention all the risks associated with investment in this RPL IPO. It is upto you, the investor to go through and be satisfied, whether the company is worth investing in……. Many-a-times, investors or traders or speculators like us, do not go through the red-herring or final prospectus and just because of herd instinct go forward and apply in IPOs.  Is it right to speculate like this? IPO is a mechanism in the economy for public to encourage and contribute in joint stock companies which are promising for the indian economy and invest and profit from it. But things are becoming more speculative and volatile due to not being better informed and following herd instinct – again! Disclaimer: It is not my indication to not apply in this IPO or apply in this IPO. My point is straight forward and clear… that is to… be better informed and avoid herd instinct.