Chairman of Enam Financial Consultants, Vallabh Bhansali says that over the next 2-3 days, price of Reliance Petro will settle in a natural position.
He believes that Reliance Petro will not be a static story. Bhansali says that if the RPL stock corrects significantly, then there will be appetite for it.
Excerpts from CNBC - TV18's exclusive interview with Vallabh Bhansali:
Rs 100 is the listing price, it has just cooled off a little bit. Your thoughts on how well it has listed
A: It has listed very well, it was probably in line with expectations seeing the way the market was behaving over the last few days and it truly has been a historic moment.
Having looked at Reliance for so many years and now having seen the facilities of Reliance Petroleum Limited, do the two lend themselves to a comparison from a valuation perspective?
Over the years, right from their Naroda plant to Patalganga to Hazira, I have seen how the plants and execution have become better and better. There is a huge amount of innovation, starting as an importer of technology and now to the creator of technology, creator of infrastructure, creator of marketing approach, the company has evolved beyond description. I do not think they are even comparable from where they have started. I would say that going to Jamnagar is a pilgrimage for any businessman.
Could you map out the kind of growth you see for Reliance Petro, both in terms of speed of execution for this project and the kind of return on capital you are expecting from a Reliance Petro story?
If one looks at the whole approach to the project, this is an intelligent response to market opportunity. They saw that the world is starved of high quality diesel and petrol and they found the sweet spot in the whole market place and quickly decided to implement this.
To have 35,000 people work on this project much before the IPO came on the drawing board speaks not only of great vision, but also of great execution capability. They expect 150,000 people to get on the site in the next six months and to say this is a world record is to belittle the whole thing. It is a salute to human ingenuity and determination. That is what this whole project is all about.
Enam sold more than $5 billion of this paper to the international community and I think we were able to convince them as we made out a detailed case of what this was all about. I think a story of this kind has not happened in the global capital markets for a very long time
What is the sense you get from foreign investors? Even with the kind of strong listing that Reliance Petro has had, is there a lot of appetite waiting on the sidelines to get into a story like this?
Since the IPO was sold so aggressively far and wide, I think we captured a lot of demand but people wanted to see how it trades and lists etc. So we will have to allow the price to settle in a natural position, which will happen over the next 2-3 days. As time goes by and with the presence of Chevron in the company, I am sure this company is not going to be a static story. Investors will keep watching this space all the time. I think if this stock corrects significantly, there will be appetite.
What about project risk because everybody knows about the execution strength of the Reliance group, but this is a project that will only come up and do a full year in FY10. Do you see significant risks in execution because this is by nature a greenfield, which has come at a significant premium to the market?
This is not really a greenfield. This would be a brownfield, the whole point is to take advantage of the market situation. For example, the Indian refineries are regulated differently. This will be an export-oriented unit and therefore it will be a different market opportunity.
Today the global markets are investing big time in infrastructure projects and that is not happening at par. Given the amount of money in the market, given the sophistication amongst investors, something that will start generating revenue in 2009-2010 starts becoming valuable to them long long before that.
Today it is not just the India dedicated funds or emerging market funds that are investing in India, some of the big pension funds are looking at India very seriously and they are looking at ideas that will mature over the 4 or 5 or 10 to 15 or 20 years because they have to invest for that kind of period and they find that India is one of the best destinations for that in some companies and some projects.
They know that when the project is on stream this is not the price they will get the stock at. So a lot of people have been the highest mobiliser in this issue. We have talked to all kinds of investors, from the most believing to the most non-believing.
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