Why Anil Ambani’s ADAG Group Stocks Are Rising — Key Reasons Explained
On September 18, the Anil Dhirubhai Ambani Group (ADAG) stocks saw a significant upswing. This blog post delves into the critical factors driving this surge, offering investors and market watchers valuable insights.
Reliance Infrastructure Ltd, a key entity within the ADAG, has reported a substantial reduction in its external debt liability. The company's debt has decreased markedly from Rs 3,831 crore to just Rs 475 crore. This announcement was well-received by investors, as evidenced by over a 9% rise in the stock price during Wednesday's trading session.
Strategic Novation of Securities
The reduction in debt was facilitated by Invent Assets Securitisation and Reconstruction Pvt. Ltd., a lender to Reliance Infrastructure, which novated charged securities to facilitate debt recovery. Novation involves transferring securities to a clearing house for sale to prospective buyers, which has effectively reduced Invent ARC’s outstanding fund-based amount to zero.
Clearance of Outstanding Dues
Further bolstering its financial position, Reliance Infrastructure has settled its funded dues with major creditors including Life Insurance Corporation of India (LIC), Edelweiss ARC, ICICI Bank, and Union Bank. This has significantly enhanced the company’s net worth, which now stands at Rs 9,041 crore.
Settlement of Obligations and Legal Resolutions
On the legal front, Reliance Infrastructure reached a one-time settlement with Edelweiss ARC, resolving obligations related to Non-Convertible Debentures (NCDs) valued at Rs 385 crore. This agreement has also led to the suspension of all legal proceedings between the two entities, stabilizing the company’s operational landscape.
Fund-Raising Under Consideration
Moreover, the buzz around ADAG stocks intensified with Reliance Infrastructure's announcement of an upcoming board meeting on September 19, 2024, aimed at discussing various capital-raising strategies. The agenda includes exploring options such as the issuance of equity shares, convertible warrants, and other equity-linked securities through methods like preferential issues, qualified institutional placements, and rights issues.
Reliance Power Hits Upper Circuit Following Debt Settlement
Reliance Power Ltd, another ADAG firm, has also made headlines by hitting the 5% upper circuit after settling a Rs 3,872 crore guarantor obligation for Vidarbha Industries Power. This settlement has cleared Reliance Power of all related corporate guarantees and obligations, further declaring the company free of bank and financial institution debt. As of the first quarter in FY25, Reliance Power’s consolidated net worth is reported at Rs 11,155 crore.
Conclusion
The ADAG stocks' rise is largely attributed to strategic debt reduction, settlement of outstanding obligations, and resolution of legal challenges. This development may provide some reassurance amidst the regulatory scrutiny faced by Anil Ambani, following SEBI's imposition of a five-year ban and a Rs 25 crore fine for alleged fund diversions. Despite these legal challenges, Reliance Power has stated that these proceedings do not affect their current business activities, noting that Anil Ambani had already resigned from the board subsequent to an interim order in 2022.
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