Increase In Anil Ambani Group Of Company's Shares & Decrease In Debt Attracts Investors
Shares of Anil Dhirubhai Ambani Group (ADAG) companies have extremely outturned the market so far in fiscal 2021-22 (FY22). For instance, Reliance Power, has seen an enormous 192 per cent rise in FY22 so far, compared to a 6 per cent rise in the S&P BSE Sensex during the same period. The S&P BSE Mid-cap and S&P BSE Small-cap indexes are up 14 per cent and 22 per cent respectively so far in FY22, according to the data. Shares of the companies have risen nearly 200 per cent in the past one year, helped by higher sales, with analysts attributing the rise to a diminution in debt at group companies. So far this month, shares are up nearly 50%.
"In the last one year, Reliance Infra is up 281%, Reliance Capital is up 154%, Reliance Navel Engineering is up 160%, Reliance Communications is up 271%, while Adani Home Finance has increased by 180%."
The Head, PMS- Hem Securities, Mohit Nigam said that the ADAG group, which has been in debt for a very long time and hence has been stuck at low prices, is witnessing a rally in the last few weeks as the market is talking of resolutions by the group companies coming in earlier than expected. There is also some news suggesting that there will be sufficient surplus for the shareholders after the agreement with the debtors.
Recent plans to raise capital have also attracted investors’ interest.
Last week, Reliance Power announced plans to raise Rs1,325 crore by issuing privileged shares and warrants to Reliance Infrastructure. It will concern up to 59.5 crore equity shares and up to 73 crore warrants, which can be converted into a corresponding number of equity shares of Rs 10 each by converting debt to Reliance Infrastructure.
Reliance Infra (RInfra) on June 7, had said that its board has approved raising an amount of ₹ 550.56 crore through preferential allotments of up to 88.8 crore equity shares and/or warrants changeable into equity shares of the company to the promoter group and VFSI Holdings Pte. Ltd, an associate of Vaerde Investment Partners LP.
In a statement issued by the company, it said that the funds raised would be used for long-term resources, general corporate purposes and to fund growths and trim down debt.
RInfra has been trying to monetize its assets to lessen its debt. In January, the company closed the sale of its Delhi-Agra toll road project to private equity investor I Squared Capital’s Indian roads platform Cube Highways for an enterprise value of Rs 3,600 crore. The company has been able to reduce its debt to Rs 8,781 crore in March 2021 from Rs 14,300 crore last year.
In December, Reliance Communications had said it has been in debt of Rs26,000 crore to Indian banks. For fiscal 2020, the company had a debt of Rs 30,737 crore. Reliance Capital reduced its debt to Rs26,887 crore in FY21 from Rs 46,160 crore two years ago. Meanwhile, some analysts have warned against trading in these stocks.
Aditya Shah, CIO, JST Investments said, "Some penny stocks like Reliance Power, Reliance Infra and Reliance Home Finance have risen 3-4 times in the last one year. However, there are no fundamentals in these companies and retail investors should definitely not speculate in these companies.”
Analysts are anticipating that the increasing interest in ADAG stocks would make the company more and more proactive and aggressive in pruning its debt and will be able to bring the business back on track within a year or two.