Want to understand the fundamental analysis for Reliance Power? In 2008, Reliance Power made history by launching the largest IPO in the Indian market. The issue size was ₹11,500 crores and was oversubscribed approximately 70 times.
Despite high optimism, the stock debuted at 17% discount.
At the time, the company had no significant business operations and just recorded a mere ₹2.2 crores revenue in FY07. The plan was to utilize the IPO proceeds for the construction and development of the new power projects and build the business.
However, onset of global financial crisis in 2008, regulatory hurdles, and market manipulation concerns resulted in the company’s share price to nosedive.
Now, fast forward to 2024, the company is again making headlines. Reliance Power share price has given returns of up to 100% in the last one year. So, what’s happening in Reliance Power share price?
So, in this article, we will do a deep dive on the company’s fundamentals and check out its future growth potential. Let’s start.
What Does Reliance Power Do?
Reliance Power is an energy generation company involved in the development, construction, and operation of power projects. The company has close to 6000 MW of operational power generation assets with diverse energy projects including coal-fired power plants and hydroelectricity projects located in Arunachal Pradesh and Himachal Pradesh. One of their significant projects is the 3,960 MW Sasan Ultra Mega Power Project in Madhya Pradesh
Recently, the company diversified into solar and wind energy projects. Reliance Power has a portfolio of 45 MW of wind energy and 140 MW of solar energy projects.
Reliance Power Management Team
Shri Anil Dhirubhai Ambani is the Chairman of Reliance Power and the Reliance ADA Group.
Shri Ashok Kumar Pal is the Chief Financial Officer and was also appointed as the manager of the company. He is a qualified chartered accountant with more than 23 years of experience in handling accounts, finance, taxation, and other statutory compliance requirements.
Smt. Ramandeep Kaur is the Company Secretary and Compliance Officer. She is also appointed as a key management personnel having more than 23 years of experience in secretarial matters with expertise in business strategy, business and corporate structuring, corporate actions.
Reliance Power Shareholding Pattern
In the domestic institution segment, LIC holds 2.56% stake in the company, and retail shareholders holding almost half of the company with 49.85% stake.
Reliance Power Financial Performance
Revenue From Operations
The revenue growth has been flat in the last five years, as you can see in the table below. In FY24, the revenue from operations of the company rose 5% to ₹7,893 crores from ₹7,514 crores in FY23.
And, in the first half of FY25, revenue from operations declined by 5% to ₹3,752 crores from ₹3,952 crores reported in the same period last year.
Net Loss
Reliance Power is consistently reporting losses in its operations and in FY24, the losses increased by over 5 times to ₹2,068 crores from ₹403 crores in FY23.
However, in the first half of FY25, the company reported a net profit of ₹2,780 crores crores against a loss of ₹534 crores reported in the same period the previous year. The profit during the period is due to an one-time exceptional gains of ₹3,230 crores on account of a deconsolidation of a subsidiary.
Key Financial Ratios
Current Ratio: The current ratio of the company in FY24 was steady at 0.3 times. It indicates that the company’s current assets are insufficient to cover the short term liabilities.
Debt-to-equity Ratio: The company’s debt to equity ratio improved marginally to 1.6 times in FY24, compared to 1.8 times in FY23.
The net debt of the company reduced from ₹5,391.7 crores in FY23 to ₹4,200 crores in FY24.
Debt Service Coverage ratio: The company’s debt service coverage ratio improved to 0.32 times in FY24 from 0.15 times in FY23.
Operating Margin: Operationally, Reliance Power is making profits and in FY24, its operating profit margin was 15%. However, it declined from 25% in FY23.
Reliance Power Share Price Analysis
In the last 5 years, Reliance Power share price has shed the tag of being a penny stock and rose by more than 1300%, from ₹3.3 to ₹46.60. Its 52-week high level is ₹54.25.
Reliance Power paid zero dividend to its shareholders since it is listed in the stock market.
The rise in Reliance Power share price due to multiple factors that will aid in improving its operational efficiency. Some of the key factors include:
- Raised ₹1,525 crore in October 2024 through a preferential allotment of equity shares from qualified investors to support business expansion and reduce debt.
- Settled debt-related disputes worth Rs 3,872.04 crore with CFM Asset Reconstruction related to Vidarbha Industries Power Ltd, thus improving the company’s financial stability.
- Signed a strategic deal to transfer the development rights of its proposed 1,200 MW Kalai-II hydro-electric project in Arunachal Pradesh to THDC for Rs 128.39 crore, which attracted significant investor attention.
- General bullish sentiment in the market towards power stocks, driven by tariff hikes in the power sector.
The normal valuation metrics will not apply to Reliance Power, since it is a loss-making enterprise. For investors, the key is to look at the growth in earnings in the next few quarters.
Reliance Power Share Price Future Growth Outlook
Debt restructuring, diversifying into renewable energy projects, and general bullish sentiment in power stocks has led to rise in the Reliance Power share price. But, the management is still facing significant challenges in improving the fundamentals of the company.
The failure of Reliance Power to emerge as a top power company in India is due to many factors like unrealistic expectations and expensive valuation of the company at the time of IPO, overambitious projects, underplayed fuel supply challenges resulted in power plants going idle, high debt levels, regulatory hurdles, and erosion of credibility in the market.
In recent months, the management of the company has shown strong intent to turnaround the company, but it needs to improve its operational efficiency and improve its earnings. The company’s ability to navigate the challenges and capitalize on growth opportunities will be crucial for its long-term success.
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How has Reliance Power share price performed in the last 5 years?
As of 18th December 2024, in the last three, Reliance share price has given returns of 71% annually, rising from ₹3.3 to ₹46.60 per share.
Is Reliance Power a profitable company?
No, Reliance Power is a loss making company, however, it is operationally profitable, reporting operating profit margin of 15% in FY24.
What type of projects does Reliance Power develop?
Reliance Power develops and operates a diverse portfolio of power generation projects, including coal-fired, gas-fired, solar, wind, and hydroelectric plants.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
