Anil Ambani-backed Reliance Power shares locked in 5% lower circuit

Reliance Power shares: Shares of Anil Ambani-backed Reliance Power were locked in five per cent lower circuit for second straight session on Monday. Reliance Power shares fell by their daily maximum limit of 5 per cent to hit an intraday low of Rs 48.43 per share on the BSE. Reliance Power shares are witnessing selling pressure on account of profit booking after Ambani-backed Reliance Power shares rallied for fifteen trading sessions in a row till last Thursday. Reliance Power shares in the last 15 sessions surged a whopping 81 per cent making it one of the swiftest rally in a very short span of time, analysts said.

Profit Booking and Recent Developments

The dip in Reliance Power shares is attributed to profit booking by investors after a strong rally. The stock had gained traction following the company's announcement late last month that it had settled dues worth Rs 3,872 crore related to a corporate guarantee for its subsidiary, Vidarbha Industries.

Meanwhile, media reports suggest that the Anil Ambani-led Reliance Group, now with a zero-debt status, is set to implement aggressive growth strategies. The group has laid out plans to raise Rs 17,000 crore through various financial mechanisms, including preferential issues, foreign currency convertible bonds (FCCBs), and qualified institutional placements (QIP).

Fundraising Details

Equity Shares and FCCBs

In the past two weeks, Reliance Power and Reliance Infrastructure announced the raising of Rs 4,500 crore through preferential issues of equity shares. Additionally, Rs 7,100 crore will be raised through equity-linked FCCBs from global investment firm Varde Partners. The FCCBs will have a 10-year maturity period and a low interest rate of 5 per cent.

QIP Plans

The group plans to raise another Rs 6,000 crore through QIPs, with Reliance Power and Reliance Infrastructure each targeting Rs 3,000 crore. Shareholder approvals for these resolutions are anticipated by the end of the month.

A senior official from the group highlighted that this capital-raising strategy, combining equity and long-term bonds, will provide the essential growth capital needed for the companies’ expansion plans. Even with a conservative debt-to-equity ratio of 70:30, raising Rs 17,000 crore in equity-linked bonds will offer a total investment outlay of Rs 50,000 crore for future business endeavors over the next few years.

Boost to Net Worth

The fundraising activities are also expected to strengthen the net worth of both Reliance Power and Reliance Infrastructure, bringing it up to around Rs 25,000 crore.

According to stock exchange disclosures, Rs 4,500 crore will be raised through preferential issues, with Rs 1,750 crore invested by the promoters. The remaining Rs 3,750 crore will be contributed by four major investors: Fortune Financial & Equities Services, Florintree Innovations LLP, Authum Investment and Infrastructure, and Sanatan Financial Advisory.

Investors and market watchers are advised to keep an eye on these developments as Reliance Power continues to navigate its growth trajectory while executing its financial strategies.