Reliance Power shares snap 15-session gaining streak; here’s why

Shares of Reliance Power, a part of the Reliance Anil Dhirubhai Ambani Group, declined 5% in early trade on Friday, snapping a 15-session gaining streak. The midcap stock was consistently hitting a 5% upper circuit for the past 12 sessions, while it maintained an uptrend since September 12, rising 72% during the same period.

On Friday, Reliance Power shares slipped to its 5% lower circuit limit of ₹50.97 on the BSE, while the market capitalisation dropped to ₹20,474 crore. In the previous session, the stock touched a 7-year high of ₹54.25 amid a sustained rally, rising 250% against its 52-week low of ₹54.25 hit on October 4, 2023.

Reliance Power, which had turned into a penny stock four years ago, has witnessed a significant recovery in its share price amid a slew of positive developments. From its all-time low of ₹1.15 on March 27, 2020, the stock has grown multi-fold in four years as the company showed some resilience to get back on track.

The stock has turned multibagger in the last one year as the company took measures to clear its debt. The counter has 170% in a year; 112% year-to-date; 53% in six months; and 64% in a month.

Reliance Power shares witnessed profit booking today even after the company informed exchanges that its board approved raising ₹4,200 crore ($500 million) through unsecured foreign currency convertible bonds (FCCBs). The company will issue up to 500 FCCBs of $10 lakh each in international offering on a private placement basis. The coupon rate is 5% per annum and the security tenure is 10 years and 1 day from the date of the FCCBs being fully paid-up. FCCBs will be allotted within 30 days from the issue closing date.

“The board of directors at its meeting held on Thursday, October 03, 2024, approved the issue of up to U.S.$ 500 million (₹4,200 crore) ultra-low cost interest of 5% per annum, unsecured, 10-year long tenure Foreign Currency Convertible Bonds (FCCBs), on private placement basis to affiliates of Värde Investment Partners, LP,” it said in a BSE filing on Thursday.

As per the regulatory filing, FCCBs will be convertible into approximately up to (82.30 crore) equity shares of ₹10 each of the company at the conversion price of ₹51 (including a premium of ₹41 per equity share. “The above conversion price is at a premium to the floor price calculated as the average of the weekly high and low of the closing prices during the two weeks preceding the relevant date i.e., October 03, 2024,” the release noted.

The board of RPower also approved the Employee Stock Option Scheme (ESOS), subject to the approval of the members of the Company. The company plans to issue up to 22,00,00,000 fully paid-up equity shares each of face value of ₹10 under the ESOS.

“The Options shall vest not earlier than minimum period of 1 (One) year and not later than maximum period of 4 (four) years from the Date of Vesting,” it added.

Last month, the cash-strapped company settled debt obligations worth ₹3,872 crore and achieved debt-free status as it has now zero debt from banks and financial institutions. Reliance Power settled all disputes with CFM Asset Reconstruction Private Limited (CFM).

Earlier in January this year, the company signed an agreement with DBS Bank India for settlement of the entire obligations for its borrowings. In June last year, the cash-strapped company had reportedly settled ₹925 crore debt owed by its subsidiary in Rosa, Uttar Pradesh, from the fund raised from Singapore-based Varde Partners. In September 2020, Reliance Power and its subsidiaries had inked a pact with Varde Partners to raise debt of about ₹1,000 crore by offering 15% equity stake in the company. The outstanding loan of the company as of March 31, 2022, was nearly ₹ 2,200 crore.

For the first quarter ended June 30, 2024, Reliance Power posted a consolidated loss of ₹97.85 crore, which narrowed from ₹296.31 crore in the same period last year, on the back of improved income. The total income rose to ₹2,069.18 crore from ₹1,951.23 crore in the year-ago period.

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