Anil Ambani's Reliance Group starts transformation journey, achieves near zero-debt

In recent years, Anil Ambani's Reliance Group has seen marquee firms being auctioned in insolvency proceedings and piling debt-fold businesses. But the group has, in the week gone by, made announcements that investors believe may mark its transformation. In three days -- from September 18 to September 20 -- the group announced it has turned into nearly zero debt and is implementing long-term fundraising plans that are said to solidify its financial position.

Reliance Infrastructure's board approved fund raising of up to Rs 6,000 crore via preferential issue and QIP, while Reliance Power board is meeting on September 23 to consider and approve the fundraise via multiple routes.

The speed at which Anil Ambani moved to clear the debt of his companies, and simultaneously announce and execute the fund raising plans for future expansion of his companies, has surprised the investors.

Shares of both firms surged on stock markets. The announcement to invest Rs 1,100 crore by the promoters group in Anil Ambani's flagship company, Reliance Infrastructure, has further boosted the confidence of investors in the group's revival plans and its long-term growth story, investors said.

Anil Ambani's twin strategy of debt reduction, coupled with fresh capital raising, has set the stage for a long-term transformation of the Reliance Group, they feel. Reliance Infrastructure's market capitalisation by the end of this week surged nearly 50%, rising from Rs 8,500 crore to Rs 12,500 crore.

Similarly, Reliance Power's market capitalisation increased over 25%, moving from Rs 11,500 crore to Rs 14,600 crore.

Reliance Infra announced a significant reduction in standalone external debt, lowering it from Rs 3,831 crore to just Rs 475 crore. This was achieved by clearing outstanding dues to prominent lenders such as Life Insurance Corporation of India (LIC), Edelweiss ARC, ICICI Bank, and Union Bank, according to company filings.

The move signals a robust financial recovery and enhances Reliance Infra's financial flexibility. Also, Reliance Infra board approved a preferential issue to raise Rs 3,014 crore, increasing the stake of Risee Infinity Pvt Ltd, a promoter group entity, along with other investors such as Florintree Innovation LLP and Fortune Financial & Equities Services Pvt Ltd.

The board also approved seeking shareholder authorization to raise an additional Rs 3,000 crore via a qualified institutional placement. This will provide further capital to strengthen the balance sheet and invest in new growth opportunities.

With these fund infusions, Reliance Infra's net worth is set to rise from over Rs 9,000 crore to more than Rs 12,000 crore, according to the filings. The company is now well-positioned to invest in high-growth sectors, investors said.