Reliance Infra Shares Surge as Board Approves ₹6,000 Crore Fundraising via Preferential Issue and QIP

Reliance Infrastructure Limited shares surged as the board approved raising ₹3,014.4 crore through a preferential issue, by issuing up to 12.56 crore equity shares at ₹240 per share. The closing price of Reliance Infra was trading at ₹306.80 at 11:30 AM IST on September 20, 7% ahead of yesterday's close.

This preferential issue is offered to the promoter group entity of the company, Risee Infinity Private Limited, and two non-promoter entities-Florintree Innovation LLP and Fortune Financial & Equities Services Private Limited. Regulatory filing confirmed that this proposed move will increase the equity stake of the promoters of the company.

"The preferential issue will enhance the existing promoter's stake and will be in consonance with the SEBI's capital and disclosure requirements guidelines of 2018, and all other applicable provisions of the law. The board has given its nod to seek shareholders' approval for raising up to ₹3,000 crore by Qualified Institutional Placement (QIP)," said Reliance Infra in a statement.

Under the agreed terms, former Blackstone executive Mathew Cyriac, through Florintree Innovation, and equity investor Nimish Shah, through Fortune Financial, will invest ₹1,200 crore for a minority stake in the company. The remainder of ₹1,814 crore will be infused from Anil Ambani, who is coming in with Risee Infinity, which currently owns a 16% stake in the firm.

The proceeds of the QIP fundraising shall be used to supplement the Company's business, directly or indirectly through subsidiaries and joint ventures, and for long-term working capitals, other than any other corporate objective.

A preferential issue generally refers to sale of shares or securities to some chosen investors, typically promoters or strategic investors, very often at a pre-negotiated price. This is in contrast to the QIP, where listed companies can raise funds by issuing shares to QIBs without going through the length of other regulatory processes. Preferential issues concentrate more on select investors, while QIPs make available broader institutional participation and quicker entry into capital markets.

Reliance Infra has also reported debt reduction progress. One of its lenders, Invent Assets Securitisation and Reconstruction Private Limited transferred some of the charged securities to recover dues, which reduced its fund-based outstanding amount to zero. Reliance Infra has also cleared part of the dues with the lenders, LIC of India, Edelweiss ARC Ltd, ICICI Bank, and Union Bank-all of which increase investor confidence.

Shares of Reliance Infrastructure closed with a marginal 0.42% gain on Tuesday at ₹282.80 on NSE. Comparing with the Nifty index, the stock had gone up by 33% year-to-date outperforming the Nifty index, which had risen by 27% for the same time period. The stock had returned 62% in the last 12 months against Nifty's 27%.

Reliance Infra stock price was trading near the 52-week high of ₹308 touched on April 4. The scrip went into limelight as considerable trading activity happened due to 23 million equity shares traded across BSE as well as NSE in the first half hour of trading.

There have been fairly volatile changes in the Reliance Infra shares over the last year, with a beta of 1.3. The Relative Strength Index of the shares is seen at 77.2, placing it well in the middle of the trading zone—it is neither overbought nor oversold. The stock is doing well above its 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day moving averages.

The standalone external debt at its own instance has been reduced to a drastic level. What was some ₹3,831 crore some time back stands at ₹475 crore. This is reflecting an improvement in the net worth of the firm to about ₹9,041 crore. With the new issue, the net worth would go up to around ₹12,000 crore, increasing investor confidence in investment opportunities in Reliance Infra.

"With nearly zero debt, the extra capital would further strengthen the company's presence in growth sectors and will support the government's 'Make in India' and 'Viksit Bharat' policies," said the company.

Reliance Infrastructure has business interests in the Engineering and Construction sector, providing solutions to power, roads, metro rail, etc, as well as other infrastructure projects. In this regard, it holds various defense and infrastructure projects in its books through special purpose vehicles. One such example of that is the BOOT project Mumbai Metro Line 1.

It is also integrated down the energy value chain and positioned as one of the main utility providers in India.