The Reliance Group shares surged in trade today after it reached a 'standstill agreement' with more than 90 per cent of its lenders under which they would not sell any of the shares pledged by promoters till September. While Reliance Infrastructure share price surged 13.01% to 129.85, Reliance Capital share price rose 11.51% to 165.65 on the BSE. The Reliance Communications share price surged over 12% to 6.15 on the BSE. The Reliance Power stock too surged over 9 percent to 11.70 in trade today.
The Reliance Group stocks came under selling pressure after Reliance Communications on February 1 reviewed the progress of the company's debt resolution plans since the invocation of strategic debt resolution on June 2, 2017.
It is estimated that RCom has been reeling under a debt of over Rs 46,000 crore.
The board noted that despite the passage of over 18 months, lenders received zero proceeds from the proposed asset monetisation plans, and the overall debt resolution process is yet to make any headway, the statement said.
Investors and lenders became nervous after Reliance Communications opted for insolvency proceedings.
For the week ended February 10 (Sunday), Reliance Communications lost 29.73 per cent of its value after insolvency proceedings announcement. Similarly, Reliance Power shed 52.58 per cent, Reliance Infrastructure 56.20 per cent and Reliance Capital 25.29 per cent since February 4.
In fact, lenders sold Reliance Power's 21.05 crore shares worth Rs 263.77 crore with 75 lakh shares worth Rs 108 crore being sold in Reliance Infrastructure from February 4 to February 8.
Another 8.98 crore shares worth Rs 52.75 crore were sold in Reliance Communications and 1.03 crore shares worth Rs 126.94 crore sold in Reliance Capital. In total, 31.81 crore shares of Anil Ambani-led Reliance Group were sold for Rs 552.17 crore.
After the huge selloff in Reliance Group shares, the report of 'standstill agreement' with more than 90 per cent of its lenders under which they will not sell any of the shares pledged by promoters till September has come as a big relief.
Under the pact, the group will pay the principal and interest amounts to the lenders as per the scheduled due dates, while it has also appointed investment bankers for part placement of the group's direct 30 per cent stake in Reliance Power to institutional investors, officials at the lenders and Reliance Group said.
The investment bankers will begin roadshows for the share placement soon, they added.
Some of the key lenders include Templeton MF, DHFL Pramerica MF, Indiabulls MF, IndusInd Bank and YES Bank.
When contacted, a Reliance Group spokesperson said, "We are grateful to our lenders for believing in the intrinsic and fundamental value of our companies, and granting their in principle approval to standstill arrangements."
Officials said the agreement has been reached with more than 90 per cent lenders of Reliance Group at the promoter group level.
Under this in-principle standstill understanding, these lenders will not enforce security and will not sell any of the promoters' pledged shares till September 30, 2019 on account of lower collateral cover or reduced margin due to the recent unprecedented fall in share prices.
Reliance Group will pay the principal and interest to the lenders as per the scheduled due dates specified in the loan agreements.
Regarding the proposed placement of shares, the bankers said the value of the promoter stake in Reliance Power, before the unprecedented fall in share prices, was more than Rs 2,500 crore, and would clear more than 65 per cent of total promoter borrowings.
Reliance Infrastructure Ltd holds 40 per cent equity in Reliance Power, and even after placement of its holding by the promoters, majority stake and control remains with the Reliance Group, the bankers said.
Officials said there are total nine lenders at the promoter level while the total borrowing from mutual funds is about Rs 1,000 crore, as against some other groups where the number of such borrowers and the quantum of loan are much higher.
Edited by Aseem Thapliyal