From fighting cases with lenders to experiencing bankruptcy, Anil Ambani’s companies have faced a lot of challenges in the last five years. Despite looming debts, one of the group companies, Reliance Power has shown some resilience to get back on track, with its share price seeing a strong rebound in its past few months.
Reliance Power, which had turned into a penny stock four years ago, has witnessed a significant recovery in its share price amid a slew of positive developments. From its all-time low of ₹1.15 on March 27, 2020, the stock has grown multi-fold in four years to hit a fresh 52-week high of ₹33.10 on January 8, 2024. In the past three months, the RPower shares have created immense value for its shareholders, with the share price nearly doubling from ₹16.3 on October 25, 2023.
In the current month of January, the shares of Reliance Power has risen 23%, while it jumped nearly 90% in six months and 110% in a year. The counter has rebounded nearly four-fold against its 52-week low of 9.05 touched on March 28, 2023. At present, the stock is trading around ₹29.61 levels, with a market capitalisation of ₹11,285 crore.
What fuelled the rally in RPower shares?
The recent rally in Reliance Power shares was triggered after the company signed an agreement with DBS Bank India for settlement of the entire obligations for its borrowings. In an exchange filing on January 5, Reliance Power said, “The company for the purpose of debt settlement has signed a settlement agreement with DBS Bank India Limited (DBS) on January 05, 2024, in settlement of the entire obligations with respect to its borrowings.”
“Till the time the loans are settled in terms of this agreement, no legal proceedings shall be initiated in this connection,” it highlighted in the filing.
Earlier in June last year, the cash-strapped company had reportedly settled ₹925 crore debt owed by its subsidiary in Rosa, Uttar Pradesh, from the fund raised from Singapore-based Varde Partners. In September 2020, Reliance Power and its subsidiaries had inked a pact with Varde Partners to raise debt of about ₹1,000 crore by offering 15% equity stake in the company. The outstanding loan of the company as on March 31, 2022, was nearly ₹ 2,200 crore.
Analysts view of Reliance Power shares
According to analysts at Choice Broking, RPower has recently shown considerable strength and upward momentum in trading sessions marked by high volume, indicating the potential for further uptrend and instilling confidence in investors. The stock's solid recovery, favourable positioning above key averages and rising momentum suggest a promising outlook for those tracking RPower in the stock market.
“Currently trading at approximately 29.95, the stock has effectively bounced back from a support zone near 23.4, closely aligning with its 20-day Exponential Moving Average (EMA). This recovery not only indicates the stock's resilience but also signals a positive trend in its trajectory,” says Deven Mehata, Equity Research Analyst at Choice Broking.
“The noteworthy aspect is RPOWER's positioning above key moving averages, including the 20-day EMA, highlighting its inherent strength. The Relative Strength Index (RSI), a significant momentum indicator, is on the rise and currently stands at 65 levels,” he says.
The analyst believes that RPower is poised to confront its next challenge at the resistance level of 37. “The stock's ability to maintain its position above crucial support levels during pullbacks underscores a solid technical setup. For investors who entered at lower levels, employing trailing stop losses with a protective buffer near the important support level of 25 is a prudent risk management strategy.”
Analyst at Prabhudas Lilladher says, “The stock has resisted near the 33 zone after the recent rise witnessed and with some profit booking seen thereafter has slipped to 28 levels with bias looking weak to some extent.”
“The near-term support lies near the 27.50 zone where it can find some consolidation and expect some recovery. Upside would need a decisive breach above 33 levels to trigger for a breakout and anticipate further rise with the next target of 36 and 44 levels visible. At the same time, our view shall get negated and the trend would turn weak only after a decisive breach below the 27 zone is confirmed,” the brokerage adds.
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