Reliance Infrastructure Shares Climb 3.5% After Winning ₹780 Crore Arbitration Dispute with Damodar Valley Corporation

Shares of Reliance Infrastructure, led by Anil Ambani, rose in the morning session on September 30, as the company's board will meet today to finalise a fund raising plan and have emerged victorious as Calcutta High Court Tuesday upheld a ₹780-crore arbitration award in Reliance Infrastructure's favour.

Shares of Reliance Infrastructure were trading at ₹329.84 at 9.18 am IST, up 2.13% over the last close on the NSE.

Reliance Infrastructure had a tussle with the Damodar Valley Corporation of the state of West Bengal. More than a decade ago, Reliance Infrastructure had bagged a tender to create a 1,200 MW thermal power plant in Purulia in the state of West Bengal for ₹3,750 crore.

In 2019, the arbitration tribunal declared the ruling in favor of the company, and at the same time ordered DVC to pay ₹896 crore to the company on account of an allegation by Reliance Infrastructure that disputes and other reasons had caused the project to be delayed; therefore DVC was seeking damages from the company.

"This is to notify that on September 27, 2024, the Division Bench of Hon'ble High Court of Calcutta delivered its judgment in a writ petition filed by Damodar Valley Corporation (DVC), assailing an arbitration award passed under Section 34 dated 29th September 2023, valued at approximately ₹780 crore, with interest accrued in favor of the company over the Raghunathpur Thermal Power Project," the company further stated in its filing. 

The court, except for relief on pre-award interest and reduction in the rate of interest on bank guarantee totalling to ₹181 crore and upheld the award, which stood at about ₹780 crore with accrued interest. Along with this, the bank guarantee of ₹600 crore shall also be discharged".

The company had indicated that it is reviewing the judgment in detail and "will proceed, based on legal advice, either to enforce the Award to the extent upheld or to challenge the judgment dated September 27, 2024, where it interferes with the Award.".

Tomorrow, on October 1, the Reliance Infra's board of directors will also be meeting to raise funds through a preferential issue, qualified institutional placement, rights issue, or foreign currency convertible bonds.

The board of Reliance Infrastructure had sanctioned raising ₹3,014.4 crore through a preferential issue of as much as 12.56 crore equity shares at an issue price of ₹240 apiece on 19 September.

"We are pleased to inform that the Board of Directors of the Company through video conferencing will, inter alia, on Tuesday, October 1, 2024, consider and approve raising of long term resources from domestic and/or global markets, inter alia, through issue of equity shares/equity linked securities /warrants convertible into equity shares, under the provisions of Section 42 of the Companies Act, 2013 by way of preferential issue and/or qualified institutional placement and/or rights issue and/or foreign currency convertible bonds or any other permitted mode constituting issue price there in if any and take approval of the members and other approvals(s) as may be required," Reliance Infrastucture added.

The preferential issue will be made to promoter group entity Risee Infinity Private Limited and other non-promoter entities Florintree Innovation LLP, Fortune Financial & Equities Services Private Limited, the company said in a regulatory filing, adding that the issue will result in enhancing the promoter's equity stake.

Reliance Infrastructure's minority stake dilution will see investments by Mathew Cyriac, former Blackstone executive, coming through Florintree Innovation, and equity investor Nimish Shah investing through Fortune Financial & Equities Services. Together they will bring in a whopping ₹1,200 crore for a minority stake in Reliance Infrastructure.

Reliance Infrastructure shares have increased by 60.5% in the past one month. To put it in perspective, the benchmark Nifty 50 clocked 3.6% increase in the same duration.

The PE ratio of the Reliance Infrastructure stock stands at -8.21 and is priced at a price to book ratio of 2.06. Earnings per share of this stock stands at -40.04. The return on equity, too, is negative at -25.15, as per the BSE website.

Reliance Infrastructure shares have recorded a one-year beta of 1.4, implying high volatility over the period. On the technical front, the RSI for Reliance Infrastructure stands at 79.4, meaning it is trading in the overbought zone. Reliance Infrastructure shares are trading above the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day, and 200 day moving averages.

The company, led by Anil Ambani, said that it had lowered standalone external debt from ₹3,831 crore to ₹475 crore. This means the net worth of the company would be ₹9,041 crore.

"Invent Assets Securitisation and Reconstruction Private Limited, a lender to the company, has novated certain charged securities to recover its dues. As a result, the entire fund based outstanding amount of Invent ARC stands reduced to zero. Further, Reliance Infra has cleared funded outstanding dues from Life Insurance Corporation of India, Edelweiss Asset Reconstruction Company Limited, ICICI Bank, Union Bank, and other lenders, the company informed through a communication to the bourses.".