Reliance Infra shares zoom 50% in 5 days; here’s why

Reliance Infrastructure Limited, a part of the Reliance Anil Dhirubhai Ambani Group, has witnessed a strong rally this week, with the stock price of the infra company surging over 50% in just five trading days. Investors rushed to buy Reliance Infra stocks after the company announced debt reduction as well as fundraising plans.  

On Friday, Reliance Infrastructure shares gained as much as 12.37% to hit a 52-week high of ₹320 on the BSE, after ending 0.71% higher in the previous session. On Wednesday, the ADAG stock was locked in its 20% upper circuit limit, while it gained 9.2% on Tuesday and 1.5% on Monday.

At the time of reporting, Reliance Infra shares were trading 6.4% higher at ₹302.90, with a market capitalisation of ₹12,000 crore. The counter saw strong volume as 18.3 lakh shares changed hands over the counter compared with the two-week average of 11.11 lakh stocks.

From its 52-week low of ₹143.70 on June 5, 2024, the share price of Reliance Infrastructure has risen 122% in just three months. The midcap stock has surged 74% in a year; 21% in six months; and nearly 43% year-to-date (YTD).

The stock price gained momentum this week after the company informed exchanges on September 16 that its board will meet on September 19 to consider raising of long term resources from domestic or global markets, by issue of equity shares/ equity linked securities/ warrants convertible into equity shares, by way of preferential issue and/ or qualified institutional placement and/or rights issue or any other method.

On September 18, RInfra said in a regulatory filing that it reduced its standalone external debt from ₹3,831 crore to ₹475 crore after Invent Assets Securitisation and Reconstruction Private Limited, a lender to the company, novated certain charged securities to recover its dues. “As a result, Invent ARC's entire fund based outstanding amount has been reduced to Zero,” it said in the filing.

Additionally, Reliance Infra cleared its funded outstanding dues to Life Insurance Corporation of India, Edelweiss Asset Reconstruction Company Limited, ICICI Bank, Union Bank, and other lenders.

Further, in a board meeting on September 19, the proposal to raise ₹3,014 crore through preferential allotments of equity shares and warrants convertible into equity shares. The company will issue up to 12.56 crore equity shares at a price of ₹240 per share, aggregating ₹3,014.40 crore.

Besides, the company seeks to raise funds up to ₹3,000 crore through qualified institutional placement, subject to shareholders’ approval.

As per the release, the preferential issue will be made to Risee Infinity Private Limited, a promoter group company and to other investors namely Florintree Innovation LLP and Fortune Financial & Equities Services Private Limited. This will result in enhancing the promoters equity stake in the company.

“Preferential Issue will enhance the company’s networth from over ₹9,000 crore to over ₹12,000 crore. The company has near ZERO debt. The enhanced capital will support the Company’s participation in high growth sectors to aid the Government’s vision of ‘Make In India’ and ‘Viksit Bharat’,” the release notes.

The company intends to use the preferential issue proceeds for expansion of business operations directly or through investment in subsidiaries and joint ventures, including meeting the long-term working capital requirements and for general corporate purposes.  

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