Introduction

Reliance Power Ltd is an Indian power generation company established to develop, construct, and operate power projects both domestically and internationally. With a current share price of ₹51.1 and a market capitalization of ₹20,523 crores, Reliance Power has a significant presence in the energy sector. In this blog, we'll delve into the company's financial performance and key developments to understand its current standing.

Key Financial Metrics

Metric	Value
Current Price	₹51.1
Market Cap	₹20,523 Cr
Book Value	₹23.4
Dividend Yield	0.00%
ROCE (Return on Capital Employed)	0.23%
ROE (Return on Equity)	-0.68%
Face Value	₹10.0

Observations:

• The ROCE of 0.23% and ROE of -0.68% indicate that the company is currently generating minimal returns on its capital and equity.
• The Dividend Yield is 0%, suggesting that the company is not paying dividends to shareholders.
• A negative ROE signifies that the company has not been profitable in terms of net income.

Company Overview

• About: Reliance Power has been established to develop, construct, and operate power projects in India and internationally. The company and its subsidiaries have a large portfolio of power generation capacity, both operational and under development.

• Operational Capacity: The company's generation capacity stands at 5,945 MW, including 5,760 MW of thermal capacity and 185 MW of renewable energy-based capacity.

• Major Operational Projects:

  • Rosa Power Plant, Shahajahnapur, UP (1,200 MW)
  • Sasan Ultra Mega Power Project (UMPP) (3,960 MW)
  • Solar PV Project at Dhursar, Rajasthan (40 MW)
  • Concentrated Solar Power Project at Pokhran, Rajasthan (100 MW)
  • Wind Project at Vashpet, Maharashtra (45 MW)

Financial Performance

Quarterly Performance

Quarter	Sales (₹ Cr)	Net Profit (₹ Cr)	EPS (₹)
Jun 2021	13.89	-78.14	-0.28
Sep 2021	18.49	-59.27	-0.17
Dec 2021	4.59	-72.20	-0.21
Mar 2022	4.92	-67.71	-0.20
Jun 2022	10.07	-69.18	-0.20
Mar 2023	0.00	879.50	2.35
Jun 2023	7.49	-17.14	-0.05

Observations:

• The company has reported losses in most quarters, with a significant profit of ₹879.50 Cr in March 2023 due to exceptional items.
• EPS has been negative in most quarters, reflecting the company's struggles with profitability.

Profit and Loss Statement

Year	Sales (₹ Cr)	Net Profit (₹ Cr)	EPS (₹)
Mar 2020	54	-389	-1.39
Mar 2021	38	55	0.20
Mar 2022	40	-277	-0.82
Mar 2023	-1	655	1.75

Observations:

• The company's annual sales have been declining, with negative sales reported in 2023.
• The net profit in 2023 is primarily due to exceptional income, not from core operations.

Balance Sheet Overview

• Equity Capital increased from ₹2,805 Cr in Mar 2020 to ₹4,017 Cr in Mar 2024 due to the issuance of new shares.
• Reserves have decreased from ₹6,002 Cr in Mar 2020 to ₹5,380 Cr in Mar 2024, indicating erosion of shareholder value.
• Borrowings have decreased from ₹6,869 Cr in Mar 2020 to ₹4,200 Cr in Mar 2024, suggesting debt reduction efforts.

Cash Flow Analysis

• Cash from Operating Activities fluctuated, with a negative cash flow of ₹-10 Cr in Mar 2023 and positive cash flow of ₹43 Cr in Mar 2024.
• Net Cash Flow remained relatively stable, indicating limited cash movement.

Key Developments

• Default on Loans: In FY23, the company defaulted on repayment of loans amounting to approximately ₹270 Cr and interest payments of around ₹250 Cr.

• Hydroelectric Projects: Developing hydroelectric power projects totaling ~3,438 MW in Arunachal Pradesh, Himachal Pradesh, and Uttarakhand, which are at different stages of development.

• Samalkot Power Project (SMPL):

  • Entered into an MoU with the Government of Bangladesh to develop a 3,000 MW gas-based project in phases.
  • Steps have been taken to conclude a long-term Power Purchase Agreement (PPA) for supplying 718 MW.
  • Agreements signed with JERA Power International (Netherlands), a subsidiary of JERA Co. Inc. (Japan), to invest 49% equity in RBLPL.

• Non-Operational Projects FY23:

  • Butibori Power Plant (600 MW): Non-operational due to regulatory delays, lack of fuel supply, and commercial disputes.
  • Krishnapatnam Ultra Mega Project (3,960 MW): Facing viability challenges due to regulatory changes in Indonesia affecting coal imports.
  • Coal-based Power Project in M.P. (3,960 MW): Kept in abeyance considering the current power sector scenario.

Recent Financial Activities

• Issue & Conversion of Warrants:
  • During FY23, the company issued and allotted warrants worth approximately ₹21 Cr convertible into equity shares to VFSI Holdings Pte. Limited.
  • Issued preferential shares of ₹33 Cr to Reliance Infrastructure Limited (Promoter) upon conversion of an equivalent number of warrants.

Shareholding Pattern (June 2024)

• Promoters: 23.24%
• Foreign Institutional Investors (FIIs): 12.71%
• Domestic Institutional Investors (DIIs): 3.06%
• Government: 0.00%
• Public: 60.99%

Observations:

• The promoter holding has decreased slightly, while FII holdings have increased, indicating foreign investor interest.
• The public holds a significant portion of shares, which may lead to higher stock volatility.

Peer Comparison

Company	Market Cap (₹ Cr)	P/E Ratio	ROCE (%)	Net Profit Qtr (₹ Cr)
NTPC	4,26,750.28	19.93	10.47	5,506.07
Power Grid Corp	3,26,265.18	20.78	13.21	3,723.92
Adani Power	2,51,935.25	15.76	32.25	3,912.79
Tata Power Co.	1,53,775.72	41.88	11.13	1,188.63
Reliance Power	20,522.70	N/A	0.23	2.06

Observations:

• Reliance Power has a significantly lower market cap compared to its peers.
• The company's P/E Ratio is not available due to negative earnings.
• ROCE is substantially lower than peers, indicating less efficient use of capital.

Conclusion

Reliance Power Ltd faces several challenges, including operational inefficiencies, defaults on loan repayments, and underperforming projects. While the company is making efforts to develop new projects and reduce debt, its financial performance indicates ongoing struggles. Investors should closely monitor the company's developments, especially regarding its project executions and financial restructuring.

Disclaimer: This analysis is for informational purposes only and should not be construed as investment advice. Please conduct your own research or consult a financial advisor before making investment decisions.