Reliance Power stock jumps 100% in 3 months: A turnaround or another bubble?

Indian Express

23-06-2025

After 17 years, Reliance Power is back in the spotlight with a 100% rally in just three months. This mirrors the frenzy of February 11, 2008, when the company made its debut with a blockbuster IPO of Rs 11,563 crore. At that time, India's power sector was booming, and Reliance Power was raising funds for the country's biggest 28GW power development. However, it was also the time when the subprime financial crisis was starting to unfold in the US.
The current environment resembles that of 2008. The US economy faces potential disruptions due to tariffs and geopolitical stress, while India's green energy projects are moving ahead due to government subsidies. Renewable energy IPOs are on the rise, and companies like Suzlon Energy have turned their fate around in this cyclical upturn.
Investor optimism isn't limited to Reliance Power. RattanIndia Power's shares jumped 36% in under a week.
Reliance Power and RattanIndia Power Stock Price Momentum Between May and June 2025
Meanwhile, Reliance Home Finance, another Anil Dhirubhai Ambani Group (ADAG) firm, rallied 115% in a month, fueled by speculation around a potential comeback of Reliance Power.
So, the key question arises: Is this market reaction backed by fundamentals, or is it just another bubble?
As per media reports, order wins, debt cleanup, settlement of legal cases, and fresh funding have raised the hopes of a turnaround and are driving Reliance Power's share price. But is this enough, given the near insolvency of parent Reliance Infrastructure and the group's corporate governance issues?
Searching for value, we will look at each of the reasons and identify if it justifies the stock price.
Are project wins a sign of a turnaround?
Not necessarily. Reliance Power is no stranger to winning big orders. Its IPO aimed to raise money for 12 projects with a combined installed capacity of 28GW, the largest in the country at the time. However, prolonged delays and legal issues related to its power projects resulted in the company having enormous debt.
In 2010-11, Reliance Power's 2,400 MW gas-based thermal power plant in Samalkot, Andhra Pradesh, failed due to a natural gas shortage. The company was left with Rs 2,500 crore in debt from the Export-Import Bank of the United States, which it settled in December 2024. Reliance Power had a long list of such projects that piled up bank debt, which it has been settling for the past few years by selling assets.
Now, Reliance Power is trying its hand at large-scale solar and battery energy storage system (BESS) projects.
Reliance Power project wins in 2025
Nature of client
Client
Project Size
Investment
PSU
SJVN
350 MW solar-BESS
–
PSU
Solar Energy Corporation of India
465 MW solar and 1.86 GW BESS
Rs 10,000 crore
Bhutan Government
Druk Holding and Investments
350MW solar and 175MW BESS
Rs 2,000 crore
Source: Press Releases
The timely execution of these projects within the budget and operational efficiencies will determine whether contract wins are good news for shareholders.
Reliance Power's share price surged after the company announced that it has 'zero bank debt and no default' in its Q4 FY25 earnings released on May 9. This is a significant milestone, considering its recent escape from insolvency proceedings, unlike other ADA group companies (Reliance Capital and Reliance Naval and Engineering).
The turnaround has come through equity dilution. Debt has been converted into shares and warrants, and subsidiaries have been sold off as lenders liquidated pledged shares. For instance, the Rs 3,872 crore loan guaranteed for Vidarbha Industries Power (VIPL) was resolved in September 2024 via pledged share sales.
Every time Reliance Power reduced its debt, the company's share price showed a remarkable jump.
Reliance Power's 5-Year Stock Price Momentum
Factors Driving Reliance Power's Stock Price Momentum
Period
Reliance Power Share Price Rally
Reason for rally
9-May to 11-Jun 2025
84%
No Bank debt
13-Sep to 4-Oct 2024
70%
Settled VIPL guarantee
15-Mar to 5-Apr 2024
47%
Debt Settlement with ICICI Bank
27-Oct-2023 to 5-Jan-2024
87%
Consolidated net loss narrowed to Rs 237.76 crore in Q2 FY24 and Rs 1,000 crore preferential raising
19-May to 16-June 2023
40%
Made a Rs 1,200 crore one-time settlement offer to lenders of VIPL
19-Feb to 18-Jun 2021
411%
Reduced debt
Source: Media reports and company statements
But does it mean Reliance Power's troubles are over? Not exactly. The company has converted most of its debt to equity and convertible warrants. Equity will dilute when these warrants are exercised, thereby reducing its earnings per share (EPS).
As of now, Reliance Power has over Rs 15,153 crore debt on its balance sheet, which is 0.88x its equity as on March 31, 2025.
Debt clean-up is a sign of turnaround. However, its impact on stock price could fade because of equity dilution.
What about the future rally?
Beyond debt reduction, the focus may now shift to sustainable earnings per share (EPS). Thus, stock price rally could be driven by future operational efficiency rather than simply a 'clean-up act' for past inefficiencies.
In the case of Suzlon, the stock price rally was driven by revenue and EPS growth from wind turbine orders, which have a faster cash conversion cycle. Reliance Infrastructure has announced plans to enter solar and battery manufacturing. This is one area investors could look forward to, as backward integration could help Reliance Power secure equipment supply at a lower cost.
However, competition is intensifying. Companies like Waaree Energies and Premier Energies, both publicly listed, are expanding rapidly with clean balance sheets and vertically integrated models. Many PLI-backed firms are also entering both manufacturing and generation.
Reliance Power's success is tied to Reliance Infrastructure. When Reliance Power wins a power project, it awards an engineering, procurement, and construction (EPC) contract to Reliance Infrastructure. Reliance Infrastructure has built Reliance Power's flagship 3.96 GW Sasan Ultra Mega Power Plant in Madhya Pradesh, Butibori plant in Nagpur, among others. While inter-group contracts bring efficiency, they also tie them to others' problems. Hence, it becomes imperative to analyse the situation of Reliance Power and Reliance Infrastructure simultaneously.
The Anil Dhirubhai Ambani Group had Reliance Commercial, Reliance Capital, Reliance Naval and Engineering, all of which were sold in insolvency proceedings. As for Reliance Home Finance, promoter holdings have dropped to 0.74%. While the group still holds Reliance Communications, it has been selling communications assets to Jio.
What is left of the ADA Group is Reliance Power and Reliance Infrastructure. All hopes of a turnaround depend on these two companies. Hence, their share prices move in sync.
ADA Group is riding on investors' hopes of positive returns. With a net worth of Rs 16,337 crore and a market cap of Rs 27,291 crore, Reliance Power has a price-to-book value (P/BV) of 1.65x. It is relatively higher than RattanIndia Power's P/BV of 1.55x but lower than NTPC's 1.75x. Although NTPC has a higher ratio, its fundamentals are way better than Reliance Power's, making the latter look expensive.
Small brokerages and individual investment companies remain cautious. A market correction is likely as short-term investors book profits.
The two stocks are riding on order wins. A significantly large EPC order book will require huge working capital. For the stocks to sustain their rally, the company has to achieve smooth execution of projects, and the economic conditions have to remain favourable.
Reliance Power and Reliance Infrastructure are stocks to keep an eye on for their turnaround signs, but also be cautious for red flags that could disrupt the recovery.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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