• Reliance Power's shares fell by 5% after the Solar Energy Corporation of India (SECI) banned the company from participating in tenders for three years.
• The ban was imposed due to allegations of fraudulent documents submitted by Reliance Power and its subsidiary, Reliance NU BESS.
• Despite the ban, Reliance Power's stock has seen a return of more than 61.48% in the last six months and surged by more than 103% in the past year.
• The ban serves as a reminder of the importance of maintaining transparency and integrity in business operations.

Shares of Anil Ambani-led Reliance Power took a significant hit on Friday, November 8, as they plunged by 5% to reach the lower circuit at Rs 41.58. This sharp decline was a direct consequence of the Solar Energy Corporation of India (SECI) debarring the company from participating in any tender for the next three years. The ban was imposed due to allegations of the company submitting fraudulent documents.

The SECI, in its statement, clarified that the ban was extended to Reliance Power and its subsidiary, Reliance NU BESS. The companies had emerged as the lowest bidder for a project, a bid that was reportedly based on counterfeit documents. The fraudulent nature of the documents was discovered after the e-reverse auction, leading to the cancellation of the tender process.

The SECI's decision to ban the company was in line with the terms of the tender, which stipulates punitive action against any bidding company found guilty of submitting fake documents. This incident has drawn attention to the need for stringent checks and balances in the tendering process.

Impact on Stock Market and Financial Health

The repercussions of the ban were immediately felt in the stock market. Reliance Power's stock, which opened on a lower circuit on Friday, has seen a decline of more than 9.57% in the last month. However, it's worth noting that the stock has given a return of more than 61.48% in the last six months and surged by more than 103% in the past year. Over the last five years, the stock has rallied by more than 760%.

Despite the impressive returns, the company's financial health has been a cause for concern. In the first quarter of the financial year 2024-25, Reliance Power recorded a loss of Rs 97.85 crore on a consolidated basis. During this period, the company's income stood at Rs 2,069.18 crore. In comparison, in the first quarter of the financial year 2023-24, the company's income was Rs 1,951 crore, and it suffered a loss of Rs 296.31 crore.

In an attempt to shore up its finances, Reliance Power had approved a plan about a month ago to raise Rs 4,198 crore through foreign currency convertible bonds (FCCBs). These bonds are to be issued to affiliates of Varde Investment Partners.

Comparison with Benchmark Index and Allegations

In comparison to Reliance Power's performance, the benchmark index, Nifty 50, has risen by 0.5% in the past five trading sessions. However, it has fallen by 3.25% in the last month. Despite this, it has increased its investors' wealth by 8.5% in the last six months and 11.3% from year to date. In the last year, the benchmark index has given a return of a bit over 24%.

The latest development involving Reliance Power came to light after allegations against the company were made and tender documents revealed irregularities. The authorities were compelled to act under mounting pressure, leading to the SECI's decision to impose the ban.