Anil Ambani Led Reliance Power’s Active Debt Settlement Efforts With Lenders; An Update on Reliance Power and Reliance Infrastructure And Share Price Momentum

Reliance Power, along with its parent company, is actively working to settle outstanding debts with its lenders.

Last week, Reliance Power successfully cleared its debts with three banks – ICICI Bank, Axis Bank, and DBS Bank.

Meanwhile, Reliance Infrastructure is in the process of settling dues amounting to Rs 2,100 crore with JC Flowers Asset Reconstruction Company, according to individuals familiar with the situation.

“Aiming to achieve a debt-free status by the end of this fiscal year, Reliance Power will retain only its working capital loan from IDBI Bank,” stated a senior executive from a commercial bank.

The trio of lenders collectively had approximately Rs 400 crore in dues, and they have managed to recover around 30-35% of their principal loans, as confirmed by another lender.

In an exchange filing on January 7, Reliance Infrastructure and JC Flowers ARC had agreed upon a standstill arrangement.

Initially set until March 20, 2024, this period has been recently extended to March 31, 2024, as confirmed by a Reliance Infrastructure spokesperson.

Under the terms of the standstill agreement, JC Flowers ARC has refrained from pursuing legal action against Reliance Infrastructure until March 31, allowing the company time to secure necessary funds. On March 13,

Reliance Power secured Rs 240 crore in equity from VFSI Holdings, a subsidiary of Varde Partners, which likely contributed to settling bank dues, according to one of the bankers familiar with the matter.

JC Flowers ARC, having acquired Yes Bank‘s distressed loan book worth Rs 48,000 crore, including loans to Reliance Infrastructure and Reliance Power, holds a significant position in this financial restructuring.

As of December 31, 2023, Reliance Power reported total financial indebtedness of Rs 765 crore, while Reliance Infrastructure disclosed its indebtedness at Rs 4,233 crore for the same period.

In April 2023, Reliance Power settled loans with two lenders, JC Flowers ARC and Canara Bank, as per exchange disclosures.

In September 2022, Reliance Power allotted 200 million equity shares to VFSI Holdings at Rs 15.55 per share. Of these, 25% were subscribed at Rs 80 crore at the time, with the remainder issued as warrants.

VFSI Holdings exercised its warrant conversion rights, injecting Rs 240 crore into the company.

In August of the current year, Reliance Commercial Finance, now owned by Authum Investment & Infrastructure, invested Rs 1,043 crore in both Reliance companies, with Rs 891 crore in Reliance Infrastructure and Rs 152 crore in Reliance Power.

The Financials
Reliance Power announced a significant increase in its consolidated net loss to Rs 1,136.75 crore in February of this year for the quarter ending December 2023, attributed to rising expenses.

This marks a significant increase from the net loss of Rs 291.54 crore reported during the October-December period of the previous financial year, as disclosed in an exchange filing.

Despite a slight uptick in total income to Rs 2,001.54 crore in the reporting quarter compared to Rs 1,936.29 crore in the corresponding quarter of the previous year, the company experienced a surge in expenses to Rs 3,179.08 crore from Rs 2,126.33 crore in the prior year.

The Viewpoint
In the past five years, Anil Ambani‘s companies have encountered numerous challenges, including legal battles with lenders and even bankruptcy.

However, despite these difficulties, Reliance Power, one of the group’s companies, has demonstrated resilience by showing signs of improvement in recent months.

Its share price has experienced a notable resurgence after plummeting to penny stock levels four years ago.

Starting from a low of rupees 1.15 in March 2020, Reliance Power’s stock has experienced significant growth, reaching a fresh 52-week high of rupees 33.10 on January 8, 2024.

Over the last three months alone, shareholders have seen substantial value creation, with the share price nearly doubling from rupees 16.3 on October 25, 2023.

In January alone, Reliance Power shares surged by 23%, marking a 90% increase over six months and a 110% increase over a year.

This remarkable rebound represents almost a fourfold rise from its 52-week low of 9.05 touched on March 28, 2023.
Currently, the stock is trading around rupees 29.61 levels, with a market capitalization of rupees 11,285 crore.

So what is working in its favour?
The recent rally in Reliance Power shares can be attributed to the company’s agreement with DBS Bank India to settle its entire debt obligations.

According to an exchange filing on January 5, Reliance Power announced the signing of a settlement agreement with DBS Bank India Limited, effectively resolving all borrowing-related obligations.

The agreement stipulates that no legal proceedings will be initiated concerning the loans until they are settled.

Earlier, in June of the previous year, the financially strained company settled a debt of rupees 925 crore owed by its subsidiary in Rosa, Uttar Pradesh, using funds raised from Singapore-based Varde Partners.

In September 2020, Reliance Power and its subsidiaries entered into an agreement with Varde Partners to raise rupees 1000 crore by offering a 15% equity stake in the company.

As of March 31, 2022, the company’s outstanding loan stood at just rupees 2200 crore.

So, what are the analysts saying about the stock?

Analysts believe that Reliance Power has displayed significant upward momentum in trading sessions characterized by high volume, suggesting the potential for further growth and boosting investor confidence.

The stock’s solid recovery, favourable positioning above key averages, and rising momentum all point towards a promising outlook for those monitoring Reliance Power in the stock market.