Reliance Power share price surges 5%. Here’s why

RPower Shares in focus: Reliance Power on September 17 announced the settlement of a massive ₹3,872.04 crore debt associated with its former subsidiary, Vidarbha Industries Power Limited (VIPL), as per an exchange filing.

Reliance Power's shares were trading up 5 per cent, at ₹32.97, on September 18, at 9:30 am, on the NSE. RPower stock hit a 52-week high on August 28, 2024 at ₹38.11, as per NSE.

Reliance Power share price closed in the green, up 1 per cent, at ₹31.41, on September 17, on the BSE.

VIPL, which contributed a mere 0.11 per cent ( ₹8.73 crores) to RPower's consolidated revenue and held a negative net worth of ₹3,086.29 crore in the last financial year, will cease to be a subsidiary of RPower effective September 19, 2024, the filing added.

The transaction, initiated on September 17, 2024, involved the invocation of a pledge on VIPL's entire equity shareholding. The action was taken by Axis Trustee Services Limited, acting as a trustee for CFM Asset Reconstruction Private Limited and Axis Bank Limited, the primary lenders to VIPL.

RPower's Company Secretary cum Compliance Officer, Ramandeep Kaur, stated in the official disclosure, “The entire obligations of the Company as a Guarantor on behalf of VIPL stands fully settled resulting in release and discharge of Corporate Guarantee, Undertakings and all obligations and claims thereunder in relation to the outstanding debt of VIPL,” Reliance Power said in the official statement.

RPower's pledge details

The pledge enforcement encompasses 1,49,16,260 shares, representing 100 per cent of VIPL's equity share capital. RPower and its subsidiary, Rosa Power Supply Company Limited, created this pledge. As a result of this action, all voting rights associated with VIPL's shares will now be exclusively exercised by the lenders, who will also assume management and control of the company.

It's worth noting that this transaction does not fall under the category of related party transactions, as the lenders are not affiliated with RPower's promoter group or associated companies. Furthermore, the company clarified that this change in ownership structure is not part of any broader scheme of arrangement and does not involve the sale, lease, or disposal of any undertaking.