Reliance Power stock locked at 5% upper circuit on Rs 1,525 crore preferential issue

Reliance Power plans to allocate a significant portion of the Rs 803.60 crore proceeds to bolster its renewable energy initiatives and explore new business ventures, including addressing long-term working capital needs.

Shares of Reliance Power surged on September 24 to hit the 5 percent upper circuit after the Anil Ambani-led company announced a preferential issue of 46.2 crore equity shares worth Rs 1,524.60 crore at Rs 33 per share, a 14 percent discount to the previous closing price.

The issue is proposed to be made to promoter Reliance Infrastructure Ltd and non-promoter entities Authum Investment and Infrastructure Ltd and Sanatan Financial Advisory Services Private Ltd (Sanjay Kothari and Meenakshi Sanjay Kothari.)

With this, Reliance Infrastructure would hold 24.88 percent and the aggregate shareholding of the promoter group would be 24.95 percent of the paid-up equity share capital of the company post the allotment of up to 1.83 crore equity shares. It owned 93.01 crore shares or 23.15 percent in Reliance Power as of June 30.

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Authum Investment and Infrastructure would own 6.59 percent of the paid-up equity share capital of the company after the allotment of up to 21.82 crore equity shares. This company held 1.91 percent stake in Reliance Power as of June 30. Sanatan Financial Advisory Services Private Ltd would own 1.36 percent stake in Reliance Power post the allotment.

Reliance Power said it is a zero bank debt on standalone basis and looking poised to venture into new horizons of growth. In particular, the company intends to expand its presence in the renewable energy sector, directly and also through its special purpose vehicles and subsidiaries.

In order to augment long-term resources, enhancing net worth and financial position, reduction of existing debt, ensuring long-term viability and growth and expansion including to meet the long-term working capital requirement and for general corporate purposes, it proposed to issue fresh capital into the company, to ensure enhancing of the shareholder value, it added.

Reliance Power plans to allocate a significant portion of the Rs 803.60 crore proceeds to bolster its renewable energy initiatives and explore new business ventures, including addressing long-term working capital needs.

The company aims to invest in or support its subsidiaries, special purpose vehicles, and joint ventures through various financial instruments such as equity, quasi-equity, and secured or unsecured debt.

Additionally, Rs 340 crore will be used to convert existing debt from Reliance Infrastructure Ltd, helping to lower Reliance Power's overall debt load. This strategy is designed to strengthen the company's financial position and improve cash flow, positioning it for sustainable growth.

Also Read | Reliance Power to raise Rs 1,525 cr via preferential share issue for business expansion

"Up to 25% of the issue proceeds will be utilised for general corporate purposes, including but not limited to meeting operational expenses, corporate exigencies and managing contingencies. These funds may also be directed toward improving the company’s financial health, enhancing net worth and reducing debt, ensuring long-term growth and stability," Reliance Power said in a regulatory filing.

At 9:53 am, Reliance Power shares were locked at the 5 percent upper circuit at Rs 40.05 on NSE. The stock has rallied 67 percent so far this year, outperforming Nifty's returns of 19 percent. In the past 12 months, the counter has risen 111 percent, more than doubling investors' capital. In comparison, Nifty rose 31 percent during this period.

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