Reliance Power shares hit 5% upper circuit as debt settlement sparks investor interest

Reliance Power shares surged 5% to get locked in the upper circuit limit on the NSE on Wednesday after reports surfaced that the Anil Ambani-led firm settled its debts with three major banks.

Reliance Power stock opened at ₹23.4 apiece on NSE and rallied 5% to hit the upper price band of ₹23.9 per share.

As per media reports, Anil Ambani-promoted Reliance Power last week settled debts with ICICI Bank, Axis Bank and DBS Bank. Further, the reports also claimed that Reliance Infrastructure, the parent firm of Reliance Power, is working towards settling dues of ₹2,100 crore owed to JC Flowers Asset Reconstruction Company.

What is aiding the rally in Reliance Power stock?

A senior executive from a commercial bank was quoted as saying in one of the media reports that Reliance Power is looking at becoming a debt-free company by the end of the ongoing financial year.

Reliance Infrastructure and JC Flowers Asset Reconstruction Company signed a standstill agreement, initially set until March 20, 2024, which was later extended to March 31, 2024. Under this agreement, JC Flowers ARC agreed not to take legal action against Reliance Infrastructure until March 31, as per the notice issued to the exchanges on January 7 this year.

As of December 31, 2023, Reliance Power's total financial indebtedness stood at ₹765 crore, while Reliance Infrastructure's total financial indebtedness was ₹4,233 crore for the same period. According to earlier disclosures, Reliance Power settled loans with two lenders, JC Flowers ARC and Canara Bank, in April 2023.

Reliance Power Ltd consolidated net loss widened to ₹1,136.75 crore during the quarter ended December 2023 due to higher expenses.