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Turnaround in Anil Ambani Group Stocks or a Bubble? – Research & Ranking

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Stocks of Anil Ambani Group like RIIL, Reliance Capital, RHFL, Reliance Power, Reliance Naval and RCOM have witnessed a steep rise over the last few months. In a time, span of less than 3 months, the combined market cap of Anil Ambani Group stocks has increased by over 1000%.

 

Performance of Anil Ambani Group Stocks over the past 6 months

                                    RIIL

                            Reliance Capital

                                  RHFL

                              Reliance Power

                            Reliance Naval

                    Reliance Communications

This unprecedented surge in Anil Ambani Group stocks have generated a renewed interest among investors. With this many investors are asking the same questions:

Is the turnaround in Anil Ambani Group stocks like RCom, RIIL, Reliance Capital shares etc. for real?

Is this surge in Anil Ambani Group stocks another bubble in the making?

Some of the key reasons behind this sudden rise in Anil Ambani group stocks can be attributed to the group’s plans to reduce debt, raise funds and high levels of liquidity in the stock market.

Approval of RHFL’s plan for resolution of stressed assets

Lenders for Reliance Home Finance earlier this month approved the plan for resolution of stressed assets and selected Authum Investment and Infrastructure as the successful bidder to acquire the company after several rounds of negotiations. 

Reliance Power’s debt reduction plan

Reliance Power’s outstanding debt up to the tune of Rs. 1,325 crores will be converted to preferential shares and warrants to Reliance Infrastructure after the latter’s board gave an approval for the same.

Fund raising efforts by Reliance Infra

Reliance Infra recently issued a statement that the company would raise up to Rs 550.56 crore through preferential allotment of 8.88 crore equity shares and/or warrants convertible to equivalent number of shares on a preferential basis to a promoter group companies Risee Infinity and VFSI Holdings.

SBI’s withdrawal of \’Fraud\’ tag against Rel Infratel

In an affidavit filed on 10th June 2021, SBI withdrew the fraud tag it had levied against Rel Infratel Ltd.

High liquidity in the market

Markets have been riding high on optimism over the last few weeks. When euphoria is at its peak, in attempt to make quick bucks by cashing in on the momentum, investors often ignore fundamentals.

Is the turnaround in Anil Ambani Group stocks for real or is it another bubble in the making?

While many new investors may be unaware of the wealth erosion caused by Anil Ambani Group stocks, most old timers who lost money in these stocks can never forget the lesson they learned the hard way.

To better understand this let’s take a look at the history of Reliance Power stock:

Reliance Power

Reliance Power IPO was billed as the country\’s biggest IPO back in Feb 2008. The huge bull run in the preceding years between 2003 to 2007 and the Reliance tag associated with the company caught investor frenzy with everyone from ordinary investors to HNI investors and foreign investors rushing in to invest in the IPO. To encash on the potential wealth creation opportunity presented by the Reliance Power IPO many investors even resorted to borrowing money while many liquidated their other investors. The issue was oversubscribed by 72 times.

However negative global sentiments due to emergence of the American subprime crisis and poor fundamentals took a toll on the stock of Reliance Power post listing. After rallying to Rs. 599 post listing, the stock settled 17% lower than its issue price of Rs. 430 at Rs. 372. Bonus shares issued by the company in the ratio of 3:5 did not help either. The stock continued its downward spiral and had been languishing in single digits until the recent spurt where it is currently trading at around Rs. 15 levels.

Same has been the case with most other stocks in the Anil Ambani Group which have eroded investor wealth significantly. While a turnaround might be possible in the long run, at this point there appears to be no major significant change in fundamentals of any of these companies. The current momentum alone should not be a reason for retail investors to enter these stocks.

There are many better investment opportunities available in the market with the potential to multiply your wealth by 4-5 times in the next 5-6 years. Click here to invest in the them.

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