The shares of Alok Industries, a textile company, witnessed a significant surge after Reliance Industries Limited (RIL) invested ₹3,300 crore by subscribing to preference shares. This massive fund infusion by RIL has provided much-needed financial support to Alok Industries, which intends to utilize the raised capital to pay off its debts. The stock price of Alok Industries experienced a remarkable increase, hitting the upper circuit and closing at ₹25.80. This move by RIL portrays its commitment to supporting Alok Industries and highlights its confidence in the company’s future prospects.
The shares of Alok Industries experienced a significant boost after RIL, the company’s promoter, invested ₹3,300 crore through the issuance of non-convertible redeemable preference shares. This infusion of funds instilled confidence among investors, resulting in a surge in the stock price. The market response was so positive that the shares hit the upper circuit, closing at ₹25.80 on the NSE.
Utilization of Funds to Reduce Debt Burden:
A major portion of the funds raised by Alok Industries through RIL’s investment will be used to pay down the company’s existing debt. This strategic move aims to alleviate the financial burden and improve the overall financial health of the company. By reducing its debt, Alok Industries can enhance its operational capabilities and focus on growth opportunities.
RIL’s Ongoing Support as Alok Industries’ Promoter:
As the promoter of Alok Industries, RIL has been extending significant financial support to the company. In addition to the recent fund infusion, RIL provided a deed of guarantee in favor of the State Bank of India for a term loan of ₹1,750 crore. This demonstrates RIL’s commitment to ensuring the stability and growth of Alok Industries.
Acquisition of Alok Industries by RIL and JM Financial Asset Reconstruction Co:
In 2020, RIL, along with JM Financial Asset Reconstruction Co, acquired Alok Industries under the bankruptcy process. This strategic acquisition enabled RIL to strengthen its presence in the textile industry and leverage Alok Industries’ manufacturing capabilities. The infusion of funds by RIL further solidifies its position as a key stakeholder in the company’s growth.
Financial Performance of Alok Industries:
Alok Industries reported a loss of ₹175 crore in the September quarter, slightly lower than the loss of ₹192 crore in the same period last year. However, for the half-year ending in September, the company’s losses amounted to ₹401 crore, higher than the ₹333 crore loss in the previous year. The fund infusion by RIL is expected to provide the necessary financial impetus for Alok Industries to improve its financial performance and move towards profitability.
RIL’s infusion of ₹3,300 crore funds through preference shares caused a surge in Alok Industries’ shares, indicating investor confidence and optimism in the company’s future.
2. How will Alok Industries utilize the raised funds?
A major portion of the funds will be used to pay down the company’s debt, reducing its financial burden and improving its overall financial health.
3. What is RIL’s role as Alok Industries’ promoter?
RIL has been providing significant financial support to Alok Industries, including fund infusions and executing deeds of guarantee for term loans, showcasing its commitment to the company’s growth and stability.
4. How did RIL acquire Alok Industries?
In 2020, RIL, along with JM Financial Asset Reconstruction Co, acquired Alok Industries through the bankruptcy process, enhancing its presence in the textile industry.
5. What is the financial performance of Alok Industries?
Alok Industries reported a loss of ₹175 crore in the September quarter, but a higher loss of ₹401 crore for the half-year ending in September. The fund infusion by RIL aims to improve the company’s financial performance and move towards profitability.