Despite ongoing volatility in the Indian stock market triggered by global factors like Donald Trump’s tariff tension, Reliance Power, a key stock under the Anil Dhirubhai Ambani Group (ADAG), has surprised investors with an impressive rally. In just one month, Reliance Power share price surged nearly 20%, outperforming not only the broader indices like Nifty 50, BSE Sensex, and Bank Nifty, but also the Small-cap and Mid-cap indices.
While Nifty 50 posted a modest gain of 1.60%, BSE Sensex edged up by 1.52%, and Bank Nifty advanced by 6.13%, Reliance Power emerged as a top alpha generator. From its historic low of ₹1 apiece in March 2020, the stock has now reached around ₹40, signaling renewed investor interest. But can this rally sustain? Should current shareholders book profits, or is there room for more upside?
Let’s know the factors behind this rally and what experts are saying about Reliance Power’s share price target.
What’s Driving Reliance Power’s Share Price Surge?
The recent rally in Reliance Power stock can be attributed to a combination of improved financial metrics, debt restructuring, operational efficiencies, and renewed investor sentiment in energy and infrastructure sectors.
1. Improved Debt-to-Equity Ratio
Reliance Power, once burdened by significant debt due to ambitious expansion plans, has taken concrete steps to improve its balance sheet. One of the turning points was the sale of Reliance Capital to IndusInd International Holdings (IIHL). This deal improved the company’s debt-to-equity ratio from 1.61 to 0.86, significantly strengthening investor confidence.
Although some reports suggest that the company is now debt-free, recent financial disclosures indicate that it still holds ₹250 crore in Non-Convertible Debentures (NCDs). While bank debt has been eliminated, Reliance Power isn’t completely net debt-free yet.
2. Positive Profit Figures – But With Caveats
In Q2FY25, Reliance Power reported a net profit of ₹2,878 crore, driven largely by an exceptional income of ₹3,000 crore from the deconsolidation of its subsidiary, Vidarbha Industries Power Limited (VIPL). In Q3FY25, the company posted a smaller net profit of ₹42 crore, mainly due to other income of ₹307 crore.
This indicates that while the headline profit figures are impressive, the company has yet to consistently generate profits from its core business operations. Nonetheless, the trend marks a significant turnaround compared to previous years.
3. Operational Efficiency and Renewable Energy Push
Operationally, Reliance Power’s thermal power plants are among the top performers in India. The company is also actively diversifying into clean and renewable energy, aligning with India’s long-term energy transition goals.
One of its subsidiaries has recently won a major solar and battery storage project, positioning itself to become a leading player in Asia’s renewable energy market. The company has also outlined plans to invest in green energy projects in Andhra Pradesh, showcasing a strategic shift in business direction.
Technical Outlook: Should You Buy, Hold, or Wait?
Stock market analysts are cautiously optimistic about Reliance Power’s prospects.
According to Mahesh M Ojha, AVP – Research at Hensex Securities, the stock has formed a strong base around ₹36. Currently facing resistance at ₹44, a breakout above this level on a closing basis could drive the share price towards ₹48 and ₹52 in the near term.
For existing investors, analysts recommend holding the stock, at least until the ₹52 mark is tested. Meanwhile, those with a high-risk appetite can consider momentum buying, with a stop loss at ₹36.
Risks to Watch Out For
While the short-term outlook appears promising, it’s important to remember that Reliance Power is still in the recovery phase. Here are some key risks:
- High Volatility: The stock has a history of extreme price swings.
- Uncertain Profitability: Core business operations are yet to consistently deliver profits.
- Debt Overhang: While reduced, debt still exists in the form of NCDs and planned FCCBs (Foreign Currency Convertible Bonds).
- Global and Domestic Macroeconomic Factors: Any major policy change, interest rate movement, or global disruption can impact investor sentiment.
Final Thoughts: Long Road Ahead, but Signs Are Encouraging
Reliance Power has come a long way since its fall from grace. The stock’s current rise from ₹1 to ₹40 is a testament to improving fundamentals, strategic business shifts, and better financial discipline. However, with the stock once trading at ₹375 apiece, there’s still a lot of ground to cover.
The short-term outlook remains bullish, supported by technical charts and renewed interest in energy stocks. However, long-term investors should keep an eye on core profitability, execution of renewable energy projects, and debt servicing ability.
