Can Anil Ambani make a comeback?
MUMBAI: The Anil Ambani group, under financial distress for years, has come up with some financial recovery claims. In the last couple of weeks, the group’s only remaining functional companies Reliance Infra and Reliance Power have announced that they are going to be net debt-free and that these companies are on a solid financial footing. Both RInfra and RPower have announced a cumulative fund raising plan of Rs 7,500 crore.
The speed at which Anil moved to clear debt, and simultaneously announce new fundraising plans, have surprised investors and shares of the firms surged, with RInfra’s market cap rising 50% to Rs 12,500 crore and of RPower’s by 25% to Rs 14,600 crore in one month.
Of the Rs 6,000 crore fund infusion into Reliance Infra, Rs 1,200 crore will come from Anil himself and Rs 1,800 crore from fund managers including former Blackstone executive and fund manager Mathew Cyriac’s Florintree Innovation and the rest Rs 3,000 crore from qualified institutional buyers. If fructified, post-issue Florintree will become the second-largest shareholder in RInfra.
The board of RPower has approved Rs 1,525 crore preferential issue on Monday, with Rs 600 crore coming from its promoter company Reliance Infra and remaining Rs 900 crore from Authum Investment and Infra and Sanatan Financial Advisory Services. Authum Investment and Infra, an NBFC, had acquired Reliance Commercial Finance from Anil for Rs 1 crore in 2022. RInfra will cut its debt from Rs 3,831 crore to Rs 475 crore, which is 87% reduction, by clearing outstanding dues to lenders like Life Insurance Corporation (Rs 600 cr), Edelweiss ARC, ICICI Bank, and Union Bank, as per company filings. But the filings didn’t disclose where the money has come from as it has an accumulated loss of about Rs 3,900 crore in last three years. With these fund infusions, RInfra’s net worth will rise from Rs 9,000 crore to Rs 12,000 crore, so says the filings.
What is to be seen how the new investors will gain a few years down the line. The board approved seeking shareholder nod to raise an additional Rs 3,000 crore via a QIP.
On September 18, RPower said it settled a Rs 3,872 crore guarantee for Vidarbha Industries Power, without disclosing source of money. This come on the heels of the firm reporting a cumulative net loss of Rs 3,600 crore in past three years. This settlement resulted in the release of all corporate guarantees and obligations related to outstanding debt of Rs 3,872.04 crore.
As of FY24, RPower had a portfolio of power projects and coal mines with 5,945 mw of installed capacity. It has claimed to have resolved disputes with CFM Asset Reconstruction. The settlement included its subsidiary Rosa Power prepaying Rs 850 crore to Singapore-based lender Varde Partners. Some reports said Anil has set his sight on electric vehicles space and has a subsidiary Reliance EV that’s being led by an ex-executive of China’s BYD Co, known as Tesla of Middle Kingdom.
The financial stage may be set for a possible transformation if and when the fund infusion happens, but what will be critical is how Anil steers the company, said an analyst on condition of anonymity as “his past doesn’t give anyone any confidence that he has learnt from his mistakes.” Lack of faith among analysts on a possible revival stems from the fact that both the companies continue to make losses.
RInfra had made huge losses in past three fiscals – Rs 646 crore in FY24, Rs 2,473 crore in FY23 and Rs 679 crore in FY22 and Rs 3,105.76 crore net income in FY21, even in Q1FY25 it had net loss of Rs 69 crore. RPower made huge losses during the same period. Its consolidated net loss stood at Rs 98 crore in June 2024 quarter; Rs 2,242 crore in FY24, Rs 343 crore in FY23 and Rs 923 crore in FY22 and net profit of Rs 4,271 crore in FY21. So, the question that bugs analysts is where the promoters have got the money.
An email seeking clarity on source of funds and timeline for prepaying debt didn’t elicit response till the time of going to press. A company source told TNIE it has made all the disclosures in exchange filings and nowhere does it says that any of the funding would be from internal accruals.
When the Reliance empire was split between brothers Mukesh and Anil, after years of a bitter legal battle in the apex court and public spats (both he lost), Anil was given a huge cash payout that rumour mill had run in excess of Rs 50,000 crore and had all key consumer facing businesses of Dhirubhai empire under his command except oil & gas. While Mukesh grew his business manifold and entered many new areas and have become brute market leaders in all the segments he has set foot in, Anil group companies went down one after another in quick succession, the latest being Reliance Capital, which went under the insolvency axe.
