Home / Markets / Stock Markets /  Anil Ambani-led companies trim debt, stocks surge over past year

MUMBAI: Shares of Anil Dhirubhai Ambani group companies have surged nearly 200% over the past year backed by higher volumes, with analysts attributing the rise to a reduction in debt at group entities . So far this month, the stocks have risen nearly 50%.

Over the past one year, Reliance Infra has advanced 281%, Reliance Capital 154%, Reliance Navel Engineering 160%, Reliance Communications 271%, while Adani Home Finance has jumped 180%.

"The ADAG group, which has been debt ridden for a very long time and consequently stayed at low prices, is seeing a rally over the past couple of weeks due to market chatter of resolutions of the group companies coming in sooner than expected. There is also some news suggesting that post settling with the debtors there will be sufficient surplus for shareholders," said Mohit Nigam, Head, PMS - Hem Securities.

Recent fund-raising plans have also piqued investors interest.

Last week, Reliance Power announced plans to raise Rs1,325 crore by issuing preferential shares and warrants to Reliance Infrastructure. It will issue up to 59.5 crore equity shares and up to 73 crore warrants convertible into equivalent number of equity shares at Rs10 each by conversion of debt to Reliance Infrastructure.

On 7 June, Reliance Infra (RInfra) had said its board has approved raising a sum of 550.56 crore by preferential allotment of up to 88.8 million shares and/or warrants convertible into shares of the company to promoter group and VFSI Holdings Pte. Ltd, an affiliate of Värde Investment Partners LP.

The funds raised would be utilised for long-term resources, for general corporate purposes, and to fund growth as well as to reduce debt, the company said in a statement.

RInfra has been looking to monetise its assets to reduce its debt. In January, it 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 3,600 crore. It reduced its debt to Rs8,781 crore as of March 2021 from Rs14,300 crore last year.

In December, Reliance Communications had said it owes Rs26,000 crore to Indian banks. For fiscal 2020, the company had a debt of Rs30,737 crore.

Reliance Capital pared its debt to Rs26,887 crore in FY21 from Rs46,160 crore two years ago.

Some analysts have, meanwhile, cautioned about trading in these stocks.

"Some penny stocks like Reliance Power, Reliance Infra, and Reliance Home Finance have gone 3-4times in the last one year. However, there are no fundamentals whatsoever in these companies and retail investors must absolutely not speculate in these companies", said Aditya Shah, CIO, JST Investments.

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