In a move that strengthens its hold on Alok Industries, Reliance Industries Limited (RIL) has acquired 9% of the textile major's preference shares for a whopping ₹3,330 crore. This transaction, completed on January 2, 2024, marks a significant development in the ongoing saga of Alok Industries' revival under RIL's wing.
Key Takeaways:
• RIL acquired 9% non-convertible redeemable preference shares of Alok Industries through a private placement.
• The deal values the preference shares at a premium of 10% over the current market price of Alok Industries' equity shares.
• RIL will be entitled to a fixed 9% annual dividend on the acquired preference shares.
• The move strengthens RIL's control over Alok Industries and provides much-needed capital for the company's turnaround efforts.
Background:
RIL and its partner JM Financial ARC acquired Alok Industries through an insolvency resolution process in 2019 for ₹5,000 crore. At the time, the textile company was struggling under a massive debt burden of ₹30,000 crore. Since then, RIL has been working to revive Alok Industries, investing in modernization and expansion plans.
Analysts' Insights:
The acquisition of preference shares is seen as a strategic move by RIL to solidify its control over Alok Industries. The fixed dividend on the preference shares provides RIL with a steady stream of income, while also giving it greater voting rights in the company.
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"This deal is a win-win for both RIL and Alok Industries," said a Mumbai-based market analyst. "RIL gains increased control and a steady income stream, while Alok Industries gets access to much-needed capital for its turnaround plans."
Looking Ahead:
The acquisition of preference shares is expected to boost investor confidence in Alok Industries' revival prospects. The company is now better positioned to implement its turnaround plans and potentially return to profitability in the near future.
RIL's continued investment in Alok Industries highlights the growing importance of the textile sector in India. The government's focus on boosting domestic manufacturing and promoting exports is expected to provide further tailwinds for the industry.