Anil Ambani’s Reliance Group is set to raise ₹6,000 crore as part of a larger fundraising initiative totaling ₹17,600 crore. This news comes on October 21, 2024, as the company aims to enhance its financial standing and support future growth strategies. Despite the ambitious plans, the stock prices of Reliance Infrastructure and Reliance Power have faced significant declines, with reports indicating a drop of up to 90% in recent times.
Main Points
Fundraising Overview
The ₹6,000 crore will be raised through a Qualified Institutional Placement (QIP), with both Reliance Infrastructure and Reliance Power targeting ₹3,000 crore each. This move is part of a broader strategy that includes raising ₹4,500 crore through preferential equity issues and an additional ₹7,100 crore from Varde Partners via equity-linked foreign currency convertible bonds (FCCBs). These bonds have a long maturity period of ten years and a low interest rate of 5%.
Breakdown of Fundraising
- Total Fundraising Target: ₹17,600 crore
- QIP Contribution: ₹6,000 crore
- Reliance Infrastructure: ₹3,000 crore
- Reliance Power: ₹3,000 crore
- Preferential Issues: ₹4,500 crore
- Investment from Varde Partners: ₹7,100 crore
This comprehensive fundraising plan aims to provide essential growth capital for the companies’ expansion efforts. Anil Ambani’s group has emphasized that this strategy will allow them to maintain a conservative debt-to-equity ratio of 70:30 while significantly boosting their overall investment capacity to approximately ₹50,000 crore over the coming years.
Stock Performance
Despite these positive fundraising developments, stock performance has been troubling. On October 18, 2024, shares of Reliance Infrastructure closed down by 8%, while Reliance Power saw a decline of over 5%, with its shares closing at around ₹50.95. The steep drop in stock prices has raised concerns among investors about the companies’ financial health and future prospects.
Historical Stock Trends
- Reliance Infrastructure:
- Recent close: ₹300 (down by 8%)
- Yearly performance: Significant decline noted
- Reliance Power:
- Recent close: ₹50.95 (down by over 5%)
- Yearly performance: Shares down approximately 90%
The drastic fall in stock prices has led to speculation regarding the companies’ ability to recover and successfully implement their growth strategies.
Investor Confidence
Despite the current challenges in stock performance, there appears to be strong support from shareholders for the fundraising initiatives. The resolutions for raising funds received over 98% approval during a recent postal ballot. This overwhelming support indicates a level of confidence in Ambani’s leadership and strategic direction for the company.
Key Investors Involved
- Promoters are expected to contribute significant amounts through preferential allotments.
- Major investors include:
- Fortune Financial & Equities Services
- Florintree Innovations LLP
- Authum Investment and Infrastructure
- Sanatan Financial Advisory
These contributions are crucial as they not only provide necessary capital but also signal trust in the company’s future direction.
Future Plans
The funds raised are intended for various purposes including:
- Expanding business operations
- Meeting long-term working capital needs
- Investing in subsidiaries and joint ventures
With these plans in place, Reliance Group aims to enhance its net worth significantly—from around ₹9,000 crore to approximately ₹25,000 crore post-fundraising. This financial boost is expected to position the company for stronger growth moving forward.
