Reliance Power Hits 5% Lower Circuit Following ₹4,200 Crore FCCBs Issuance

Reliance Power shares hit a 5% lower circuit on October 4, driven by market weakness and profit booking. This decline follows the company’s announcement on October 3 regarding the issuance of ₹4,200 crore Foreign Currency Convertible Bonds (FCCBs). The bonds will be offered on a private placement basis to affiliates of Värde Investment Partners, carrying an ultra-low 5% interest rate per annum and an extended 10-year tenure.

The FCCBs will be convertible into up to 82.30 crore equity shares of ₹10 each at a conversion price of ₹51, which includes a premium of ₹41 per share. This price offers a slight premium over the stock's recent performance, calculated based on the average of the weekly highs and lows from the two weeks preceding the issue.

Profit Booking Amid Market Weakness

The sharp decline in Reliance Power's share price is also attributed to profit booking as the stock has witnessed a massive 64% surge in the last month alone. Despite today's dip, the stock has proven to be a multi-bagger, delivering a 112% return so far this year. In the past year, Reliance Power shares have jumped by over 170%, significantly outperforming the 30% rise in the Nifty 50 benchmark index.

Värde Investment and Strategic Moves

The board also approved the issuance of these FCCBs to raise capital for key business activities. According to the company, a substantial portion of the proceeds will be allocated to expanding its presence in the renewable energy sector, as well as exploring other business opportunities. This capital infusion will also help meet long-term working capital requirements.

Additionally, the company has proposed an Employee Stock Option Scheme (ESOS), subject to approval by shareholders. This move is aligned with its growth strategy as Reliance Power seeks to reward employees while expanding its market presence.

Promoter and Investor Involvement

Earlier this year, Reliance Power allotted 46.20 crore equity shares through a preferential issue worth ₹1,524.60 crore. These shares were issued to Reliance Infrastructure Ltd and two non-promoter entities—Authum Investment and Infrastructure Ltd and Sanatan Financial Advisory—furthering the company’s goal of expanding its renewable energy portfolio.

With a clear focus on the renewable sector and sustained interest from major investors, Reliance Power is positioning itself for continued growth despite recent market fluctuations.

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Reliance Power's recent market performance underscores its ambitious growth plans, particularly in the renewable energy space. While short-term fluctuations and profit booking have impacted the stock, the company’s long-term outlook remains optimistic, supported by strategic financial moves such as the FCCB issuance and investor backing.

[Disclaimer: The above information is for educational purposes only and should not be considered as investment advice. Always conduct your own research before making investment decisions.]