All the earlier euphoria of Reliance Power being listed at Rs.900 has been completely laid to rest with the share now being quoted at 20% discount to its issue price.

The problem is compounded by the fact that there are no valuations to back up the share price as the company is still a zero revenue company with the first power generation expected to commence only in 2010. It doesn’t have any cash flows and have a huge debt burden of Rs.70000 crore over Rs.12000 crore equity it has raised from market.

Reliance Power aims to generate 28200 MW of Power when it goes full stream by 2016 but this figure would be well below the market leader, NTPC which currently has 28000 MW capacity and target of 66000 MW by 2017.

NTPC has made a profit of Rs.6900 crore in 2006-07 and so at those valuations and capacity, Reliance Power should be valued close to its offer price. This price is highly optimistic as it does not consider any further equity dilution, delay in project implementation and being more efficient than its peers.

Even compared to Tata Power, Reliance Power is inexplicably over valued by over 3 times to its current market value even though the former has sound cash flows and profits to boast of and meet their expansion needs.

But amidst all this, it is only the investors who get to lose as the promoters got the shares for just Rs.17 each by susbcribing over 90% stake in Reliance Power for around Rs.3500 crore. On the other hand, investors have put in Rs.12000 crore for just 10% stake of the company.

So, in a nutshell if Reliance Power had listed at a premium, Anil Ambani would have been worth billions on a relatively partly investment.

The road ahead is still murky and is being aggravated by the volatile markets. But when it comes to Reliance, one can be sure of expecting the unexpected.