Reliance Infra to Raise Rs.3,014 Crore via Preferential Issue

Reliance Infrastructure Ltd has announced that it has taken a board decision to raise Rs.3,014 crore through the preferential issue of shares to further boost its business. In terms of the equity issue, the company will be issuing equity shares or convertible warrants up to 12.56 crore at Rs.240 per share to both the promoter and non-promoter groups

Key Investors & Stake Impact

The Preferential Issue will see the promoter group entity, Risee Infinity Pvt. Ltd, increase its existing 16.31% stake in Reliance Infrastructure. Others participating in the issue include Florintree Innovation LLP and Fortune Financial & Equities Services Pvt. Ltd. The former is led by ex-Blackstone executive Mathew Cyriac and the latter by equity investor Nimish Shah. Together, they will pump in Rs.1,200 crore; Risee Infinity will pump in Rs.1,814 crore.

Financial Incentive & Debt  Reduction

Proceeds from the issue will be used to fund the expansion of business activities through investments in subsidiaries and joint ventures besides being used to meet long-term working capital requirements and for general corporate purposes. Thus, Reliance Infrastructure’s net worth will rise from over Rs.9,000 crore to over Rs.12,000 crore.

In addition to that, the company announced a huge reduction in external debt, which stood at Rs.3,831 crore but has now been reduced to Rs.475 crore after a one-time settlement with Life Insurance Corp.(LIC)  for debentures besides clearing out all dues owed to lenders Edelweiss Asset Reconstruction Co., ICICI Bank, and Union Bank of India.

Stock Performance & QIP Plan

Shares of Reliance Infrastructure are trading at Rs.315.32  apiece, up around 10% ahead of the announcement. The stock has risen over 50% this year, outperforming Nifty’s 16% return. Over the past 12 months, it has risen more than 80%.

In a separate development, the company’s board has sought shareholder approval to raise up to Rs.3,000 crore through a Qualified Institutional Placement (QIP) for further business expansion and corporate needs.

Conclusion: Reliance Infrastructure’s preferential issue and QIP initiatives would further strengthen the company’s financials, support business growth, and reduce debt, with key investors likely to raise their stakes in the company.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.