Reliance power IPO

Credit rating agency CRISIL has assigned IPO grade '4/5' to the proposed
initial public offer of Reliance Power indicating that the fundamentals
of the issue are above average. Reliance Power proposes to come out with
a public issue of 26 crore equity shares of face value Rs 10 and plans
to raise Rs 10,500-11,500 crore.

CRISIL's view is that strong demand for power in India will catalyse
regulatory facilitation for private participation in the power sector
over the medium to long term. Early movers like Reliance Power will
benefit from attractive business opportunities that are likely to come
about as a result, especially if they achieve high levels of financial
capability, as is likely for Reliance Power after its proposed IPO.

The grading also reflects the Reliance Anil Dhirubhai Ambani Group's
commitment that Reliance Power will be the sole repository of the
Group's economic interest in the power generation segment.

The grading is tempered by the fact that Reliance Power is planning to
put up capacity, on a scale and within a time frame, never achieved in
India before and therefore it is likely to face significant
implementation challenges.

The grading also reflects the fact that power generators in India will
have to depend on State Electricity Boards for off take over the
short-to-medium term and that their return will be subject to the
regulatory oversight in case of two-part tariff based projects such as
Rosa I (600 MW) and Rosa II (300 MW).

Also, returns on the projects won through the competitive bidding route
may not be substantially higher due to competition.