Reliance Power Shares May be High Bullish Tomorrow, Board Approves Rs 1,525 Crore
Reliance Power Ltd’s board of directors approved a significant fundraising initiative aimed at raising Rs 1,525 crore through a preferential issue. This decision comes as part of the company’s strategy to enhance its financial standing and support future growth initiatives. The preferential issue will involve the issuance of up to 46.20 crore equity shares and/or warrants convertible into an equivalent number of equity shares at a price of Rs 33 per share.
Main Points
Details of the Preferential Issue
The board’s approval allows Reliance Power to raise funds from various investors, including its promoter, Reliance Infrastructure Ltd, which plans to invest over Rs 600 crore. Other notable investors participating in this issue are Authum Investment and Infrastructure Ltd and Sanatan Financial Advisory Services. The funds raised will be used for multiple purposes, including expanding business operations, investing in subsidiaries and joint ventures, reducing debt, and covering general corporate expenses.
The issue price of Rs 33 per share reflects a discount of approximately 13% compared to Reliance Power’s closing price of Rs 38.15 on the National Stock Exchange (NSE) on the same day. Following the announcement, shares of Reliance Power experienced a notable increase, gaining around 5% during trading hours.
Impact on Company Valuation
This fundraising initiative is expected to significantly bolster Reliance Power’s net worth, increasing it from approximately Rs 11,155 crore to over Rs 12,680 crore. The company has reported zero bank debt, indicating a strong financial position that will allow it to leverage this capital for growth in the renewable energy sector.
Reliance Infrastructure’s recent approval to raise Rs 6,000 crore through a combination of preferential allotment and qualified institutional placement (QIP) further underscores the group’s commitment to financial recovery and expansion. This move is seen as part of Anil Ambani’s broader strategy to stabilize and grow his companies after years of financial challenges.
Market Response
The announcement sparked positive reactions in the stock market. Reliance Power shares have been on an upward trend for eight consecutive trading sessions leading up to this announcement. The stock hit a seven-year high of Rs 38.16 earlier in the day before stabilizing. Investors have shown strong confidence in the company’s future prospects, as evidenced by the increased trading volume and market capitalization, which climbed to around Rs 15,328 crore.
The positive sentiment surrounding Reliance Power is also reflected in its recent performance metrics. The stock has surged by approximately 29% over the past eight trading days, showcasing robust investor interest and optimism regarding its upcoming projects and financial strategies.
Future Plans
The proceeds from this preferential issue will primarily focus on expanding Reliance Power’s operations in the renewable energy sector. The company has already expressed interest in participating in initiatives such as establishing battery energy storage systems (BESS) through requests for selection by the Solar Energy Corporation of India (SECI). This aligns with India’s broader goals for sustainable energy development and positions Reliance Power as a key player in this transition.
Reliance Power has also recently settled all obligations related to its subsidiary Vidarbha Industries Power Limited (VIPL), further enhancing its balance sheet and financial flexibility. This strategic move has eliminated significant liabilities that previously weighed on the company’s financial health.
