Anil Ambani-Led Reliance Power Plunges 5% After ₹4,198 Crore FCCB Issue Approval

The shares of Anil Ambani-led Reliance Power on Friday (October 4) saw a sharp drop in today's trading session, hitting a 5 per cent lower circuit.

The sharp decline in the stock prices comes on the heels of the company's board approving the issuance of Rs 4,198 crore worth of Foreign Currency Convertible Bonds (FCCBs), aimed at affiliates of Varde Investment Partners, LP.

The shares of the company today opened at Rs 53.40 apiece and went to a low of Rs 50.95 apiece on NSE, during the intraday trading session.

At 12:33 pm IST, the company's shares were trading at Rs 50.95 apiece, down by 5.01 per cent.

The FCCB Issuance: Key Details

On October 3, the company through an exchange filing announced, "The Board of Directors of Reliance Power Limited (Reliance Power) at its meeting held today has approved raising of funds upto US$ 500 million (approx. Rs 4198 cr) to affiliates of Värde Investment Partners, LP, a leading global alternative investment firm."

The board’s decision allows Reliance Power to issue FCCBs with a 10-year tenure at an ultra-low annual interest rate of 5 percent. These bonds will be unsecured and convertible into around 82.30 crore equity shares at a conversion price of Rs 51 per share, including a Rs 41 premium.

Moreover, the company in the regulatory filing also announced of the ESOP. In the exchange filing it said, "The Board of Directors also approved an Employees Stock Option Scheme (ESOS) for all employees of the Company and its subsidiaries. ESOS provides for grant of upto 22,00,00,000 fully paid-up equity shares of INR 10 each, of value of over INR ~ 1180 crore, representing approximately 5% of the Company’s fully diluted capital. The ESOS will unlock the employee earning potential, in alignment to the Company’s performance and growth. The ESOS shall be in accordance with the applicable SEBI Regulations and subject to the approval of the members of the Company."

Market Reaction: Profit Booking Follows Stock Surge

The market reacted negatively to this announcement, with the company's stock taking a hit.

Furthermore, the stock of the company has seen a significant surge of 64 percent in the past month alone, making it a multibagger stock that has increased by 112 percent year-to-date. In the last 12 months, Reliance Power’s stock skyrocketed by 170 percent, compared to a 30 percent rise in the benchmark Nifty 50 index.