Return on Capital Employed (ROCE) is low at 3%, below industry competitors.
Operating Profit Margin (OPM%) stands at 11%, also below industry standards.
Operating profit has shown a significant decline over the past five years (2018-2023).
Stock price Compound Annual Growth Rate (CAGR) over the last five years is 29%.
Return on Equity (ROE) for the same period is -3%.
Cash flows have been satisfactory over the last five years, with more debt repaid than issued. However, there was a dip in cash flow in 2019.
Debtor days/Cash Conversion Cycle reduced until 2021 but increased in 2022 before decreasing again in 2023, though still higher than 2019-2021 levels.
Promoter holding decreased from 56.29% in 2019 to 23.34% in 2024, while Foreign Institutional Investors (FIIs) increased from 7.25% in 2019 to 13.01% in 2024.
The stock suffered downtrend from listing itself. It fell almost 90% from Feb 2008 to Jan 2019.
In Feb 2019, within one month the stock fell up to 59.43%. this was due to lower-than-expected earnings in Q3 of FY18-19 coupled with Rcomm Bankruptcy news. In the same month, Zomato announced an investment of $150 million into blinkit in the form of debt. In June 2022, it announced the acquisition of Blinkit and by August 2022, it completely acquired the quick commerce company.
In December 2019, Rpower announced that its 10.19 crore pledged shares having the face value of Rs. 101.9 crore have been invoked by Reliance Infra. The total market value of these 10.19 crore shares at Rs. 3.30 per share on BSE works out to be Rs. 33.62 crore.
In mid Jan 2020, Yes bank acquired 30% stake in reliance power arm. The bank acquired 12,73,21,500 equity shares having nominal value of ₹10 each per share constituting around 29.97% of the post-issue paid-up share capital of Rosa Power Supply Company Ltd (RPSCL).
Although by month end, it sold off shares worth 5.7cr of power, dragging the stock down.
In Oct 2020, the shares hit their 20% upper circuit limit, after the company reported a two-fold jump in net profit for the September quarter. The company said "After witnessing sharp decline in the electricity demand, primarily from industrial and commercial consumer segments, arising from lockdown measures announced by the government to contain the outbreak of COVID-19, the demand is beginning to bounce back to its normal level on gradual lifting of lockdown restrictions.”
The stock surged in June 2021, due to news of transfer of preferential shares from Rpower to Rinfra, which suggested the market regarding debt reduction in Rpower after this move leading to rise in profit making profitability.
From June 2021 to Sept 2021, it rose almost 140%, from rs10.40 to rs25. But continued to fall again due to disappointing financial reports.
In September 2022, it raised a lot after the news of Varde Partners picking stake in Rpower was announced. They also announced to raise long term debt up to 1200 crores. But in less than a week, it fell again due to stake sale of VFSI Holdings at a discount 27%.
In August 2023, it was announced that NBFC Authum Investments and Infra will convert Rpower’s debt into equity. Rpower planned to issue 75.9million shares at rs20 per share to repay 152cr debt.
But on the same day, Q1 results were declared which were significantly disappointing. Technical charts show a drop of almost 11% in 15 days due to this.
In 2023-2024, company settled a lot of debt and little improved financials were observed in 2023 reports.
In Jan 2024, the stock touched its 52-week high at rs33, up almost 900% in last three years. Stock market experts noted a bullish trend in power stocks, primarily driven by expectations of tariff hikes.
In March 2024, gained almost 198% in the previous year. They informed that the subsidiaries of the company, namely Kalai Power Pvt Ltd and Reliance Cleangen Ltd, for the purpose of debt settlement has signed a debt settlement and discharge agreement with the wholly-owned subsidiary of Authum Investment and Infrastructure Ltd - RCFL on March 26, 2024, in settlement of the entire obligations with respect to their outstanding consolidated debt of Rs 1,023 crore.
ICRA, a commercial banking company, reaffirmed Reliance Power at [ICRA]D ISSUER NOT COOPERATING rating, where a total of 5726 Rs crore was withdrawn from ratings in 2019. ‘The liquidity profile of the company along with its subsidiaries continues to remain stretched as evident from considerable decline in the net cash accruals in FY 2018-19 and net-worth erosion due to significant impairment of assets’ was mentioned in the report by IRCA, 13 August 2019.
Key rating drivers were credit challenges, which include delays in debt servicing, high leveraging level, deterioration of financial performance of Rosa Power project and Vidarbha Industries, limited asset base and revenue streams, non-operational Samalkot project, exposure to counterparty credit risk. The ratings remained constant at ICRA D without any withdrawals till Nov 2023.
In Nov 2023, 1449rs crore was withdrawn by the rating agency, and the rating remained constant at ICRA D. ‘As a part of its process and in accordance with its rating agreement with R-Power, ICRA has been sending repeated reminders to the entity for payment of surveillance fee that became due. Despite repeated requests by ICRA, the entity’s management has remained non-cooperative.’ Said the report released on 30 Nov, 2023 by ICRA.
Along with the previous already existing credit challenges, ICRA highlighted the poor liquidity position of the company. ‘The company had cash and bank balances of Rs. 708 crores as on September 30, 2023, on a consolidated basis. However, most of the cash is held in various RPower subsidiaries and is subject to the restrictions imposed by the lenders at the project level. At a standalone level, the cash balances remain low with cash and bank balances of Rs. 8.08 crore as on September 30, 2023’ it said in its report.
Furthermore, the ratio of total outstanding liabilities to tangible net worth remained at a low 0.8 times in 2023 (standalone basis). The ratio of debt to EBITDA was recorded negative (-18.87 times) in 2023. Even the interest coverage of the company was negative (-1.58 times).
From Jan 2019 to April 2024, the stock touched an all time low in 2020, and is now back to the 28-30rs levels, similar to the levels in Jan 2019.
In weekly chart, the lower ema is above the higher, signalling bullish trend, although a short dip was noticed due to bearish engulfing.
Even in monthly charts, EMA lines signal bullish trend in the charts.
