Mumbai: Reliance Power is thinking over an initial public offering (IPO) to bring up around Rs 11,000 crore to finance the ultra mega power projects in Sasan and Rosa.

The sources said the company will file a draft red herring prospectus shortly.

For the Sasan and Rosa projects in UP, Reliance Power requires about Rs 21,000 crore that covers up the cost for engineering, procurement and construction (EPC) equipment purchase and technology hiring.

A Reliance Energy representative refused to say anything regarding the public issue. “It is not the company’s policy to comment on rumours and speculation,” he said.

It is generally thought that Reliance Power may divest about 15% stake, making it superior than the DLF IPO and the ICICI Bank follow-on public offer.

The company sources said that Reliance Energy and Reliance-Anil Dhirubhai Ambani Group possess 50% both in Reliance Power.

Kotak Mahindra Capital and JM Financial are expected to be the lead managers to the planned issue. Shares of Reliance Energy responded to public offer reports. The Reliance Energy stock ascended to its 52-week record of Rs 1,220 on Bombay Stock Exchange (BSE) on yesterday, before closing the day at Rs 1205.50, an increase of 7.9% as against its last day’s close.

“Reliance Power will participate in the forthcoming bids for the ultra mega power projects in Krishnapatnam in AP and Tilaiya in Jharkhand,” sources said.

The company also plans to raise capacity of its coal-based pit-head plant in Sasan from the previously planned 4,000 MW, they added.

As the cost of power for the 4,000 mw is determined through cutthroat bidding, income from it will be comparatively low. If the company adds up extra power, the extra power can be traded at market price that is five times greater than Reliance Power-quoted price of Rs 1.19 per unit for Sasan.

Additionally, if Reliance Power pockets other ultra mega power projects, the order reserve will increase. The 1,200 MW coal-based Rosa project will be functional by 2010.

According a Delhi-based market analyst, the Anil Ambani group is enthused by the stock presentation of Mukesh Ambani-controlled Reliance Petroleum.

“Reliance Petroleum is also a specific project-based company like Reliance Power. Reliance Industries has unlocked the value through the spin-off of Reliance Petroleum. Reliance Power is also likely to take the same route. It will not be surprising, if the group ropes in a foreign power player with a stake,” the analyst added.