Reliance Power Shares Surge After Board Approves Rs 4,200 Crore Fundraise Plan

Reliance Power, a leading power generation company in India and part of the Anil Ambani-led Reliance Group, has seen a significant surge in its share prices following a major fundraise approval by its board. On October 3, the company announced that it will raise up to $500 million (approximately Rs 4,200 crore) through the issuance of Foreign Currency Convertible Bonds (FCCBs) to affiliates of Vrde Investment Partners, LP, a global alternative investment firm.

The FCCBs, which will have an ultra-low interest rate of 5% per annum and a tenure of 10 years, are unsecured and will be convertible into approximately 82.30 crore equity shares of Reliance Power at a conversion price of Rs 51 per share. This move is part of the company's strategic efforts to enhance its financial position and expand its business operations.

Market Reaction and Share Price Surge

The announcement has had a positive impact on Reliance Power's share price, which rose by nearly 5% to close at Rs 53.64 on October 3. Over the past month, the share price has seen an impressive increase of over 80%, rising from Rs 29.58 to Rs 53.64. This significant rise reflects investor optimism and confidence in the company's future prospects.

The market capitalization of Reliance Power has also seen a substantial increase, reaching Rs 21,547 crore on October 3. This surge is part of a broader trend of resurgence in Anil Ambani Group stocks, with both Reliance Power and Reliance Infrastructure experiencing significant gains in recent weeks.

Employees Stock Option Scheme (ESOS)

In addition to the fundraise, the board of Reliance Power has also approved an Employees Stock Option Scheme (ESOS) for its employees and those of its subsidiaries. The ESOS will provide for the grant of up to 22 crore fully paid-up equity shares of Rs 10 each, valued at over Rs 1,180 crore, representing approximately 5% of the companys fully diluted capital. This scheme aims to align employee earnings with the company's performance and growth, subject to shareholder and regulatory approvals.

Reliance Power, with a total installed capacity of 5,340 MW, including the 4,000 MW Ultra Mega Power Project in Sasan, Madhya Pradesh, is poised for further growth and expansion. The company's recent financial maneuvers, including the prepayment of Rs 850 crore of debt by its subsidiary Rosa Power to Singapore-based lender Varde Partners, indicate a strong focus on debt reduction and financial stability.

The use of Foreign Currency Convertible Bonds as a fundraising tool highlights the company's strategic approach to managing its capital structure and leveraging international investment opportunities.

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