MUMBAI, Jan 14: India is set for its biggest ever initial public offering by Reliance Power, which begins on Tuesday and aims to raise nearly three billion US dollars, amid predictions of strong investor demand.

Reliance Power, a unit of Reliance Energy, will offer 260 million shares or 10.1 per cent of its capital amid analyst forecasts that the energy demands of India’s fast-growing economy will help to create a booming business.

“Considering the buoyancy in the stock market, we expect the IPO (initial public offering) to receive good investor response along with follow-up appetite on listing,” said Girish Solanki, an analyst at Angel Broking.

But some experts are concerned about the company’s lack of operating power plants.

The firm, owned by Indian tycoon Anil Ambani, aims to raise between 105 billion and 115 billion rupees (2.6 to 2.9 billion US dollars) through the offering, which will be open for subscription for three days from Tuesday.

The shares will be offered in the 405-to-450 rupees price band, with retail investors set to be offered a discount.

Power generation growth will “be similar to what India has witnessed” in its explosively expanding telecom sector, Ambani forecast.

Reliance Power Ltd (RPL) aims to list on the stock exchange in early Feb. The previous biggest IPO was by property giant DLF and raised 2.24 billion US dollars last Jul.

Shares of Reliance Energy, India’s second largest utility by market capitalisation, have surged nearly 30 per cent to 2,476 rupees in the past month ahead of its subsidiary’s IPO.“The interest in the IPO is very real ... people are looking for information everywhere,” said an analyst at a Mumbai brokerage, asking to remain unnamed.

However, the pricing of the IPO appeared to be “a bit aggressive” even though the company’s “business growth prospects remain robust,” said Angel Broking’s Solanki.

“The valuations must be seen in conjunction with the fact that currently, the RPL has hardly any capacity which is operating,” Solanki said.

“Most of the projects are expected to be commissioned in or after 2010. ”Reliance Power “at present has no operational power plants or other revenue generating operations,” added a note from brokerage sharekhan.com.

However, leading Indian credit rating agency Crisil awarded the IPO four out of five points, saying the “fundamentals of the issue are above average in relation to other listed equity securities in India.”

Reliance Energy has said the proceeds will fund development of various power projects. Reliance Power is developing 13 medium and large power projects with a combined planned capacity of 28,200 megawatts.

Reliance Energy emerged from a split two years ago in the Reliance group sparked by a family feud.

Anil Ambani took control of the telecommunications, power and finance activities while older brother Mukesh Ambani retained the petrochemical and oil businesses.

The IPO comes amid a share price boom in India, whose stock market has been one of the best performing in Asia, rising a record 47.1 per cent in 2007, in large part due to foreign inflows of 17.23 billion US dollars.—AFP