Shares in Reliance Infrastructure rose 12 percent in early trading as the company said its board had approved a preferential issue worth Rs 3,014.4 crore. The company would issue as many as 12.56 crore equity shares at Rs 240 per share. The announcement comes after the company has already received permission to seek shareholder authorization for another Rs 3,000 crore through a Qualified Institutional Placement (QIP). Which quoted Rs 300 for the Reliance Infra share rose to a new 52-week high at Rs 320 on the BSE with an upside of 12.37%. The stock closed up 11.13% at Rs 316.45 and the market cap for Rs 12,622 cr.
Key Developments
The gross proceeds from the preferential issue will be used by Reliance Infrastructure to invest in subsidiaries and joint ventures, long-term working capital requirements, and general corporate purposes. The fundraising will strengthen the company's balance sheet and support future growth. The preferential allotment shall increase the stake of equity by the promoter. Companies like Risee Infinity Private Limited, which is part of the promoter group, and non-promoter companies like Florintree Innovation LLP and Fortune Financial & Equities Services Private Limited would participate in the allotment.
A Sharp Rise in Share Price
The stock has rallied considerably in the last week, rising by nearly 50%. Reliance Infrastructure stock is under heavy demand and momentum, therefore, attracting investor attention. Market analysts predict that the stock can trade in a range of Rs 255 to Rs 320 in the near term and may come out positively above Rs 320. Though this stock has rallied very steeply, its financials pose considerable concerns:The Reliance Infrastructure PE ratio is at -7.11 with negative EPS of -40.04. The price-to-book value stands at 1.79, while return on equity (ROE) stands negative at -25.15%. However, the firm has been successful in decreasing its standalone external debt to Rs 475 crore from Rs 3,831 crore, thus giving a silver lining to the financial structure itself. After reducing the debt, the net worth of the company would go as high as Rs 9,041 crore.
Market Outlook
The beta of shares of Reliance Infrastructure is at 1.3, thus volatile. RSI is at 77.2, hence it's neither overbought nor oversold. The stock is trading above its moving averages: MA5, MA10, MA20, MA30, MA50, MA100, MA150, and MA200. The stock's momentum is very strong. Rebound continues at Reliance Infrastructure; Investors keep a close eye on QIP, future expansions.
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