Reliance Industries’ Investment Boosts Alok Industries’ Stock by 20%
In a significant development, Reliance Industries Ltd (RIL) has subscribed to non-convertible redeemable preferential shares worth Rs 3,300 crore in Alok Industries. This investment has led to a surge of 20% in the stock price of Alok Industries, reaching its highest level in 52 weeks at Rs 25.80. The preferential shares were privately placed with RIL at a dividend rate of nine percent and can be redeemed at par at any time within a maximum of 20 years from the date of allotment.
The market response to this investment has been remarkable, with 11 crore shares being traded, significantly higher than the average of 4 crore shares in a month’s worth of daily trading. This increased volume indicates the growing interest and confidence of investors in Alok Industries. Moreover, the stock has witnessed a 31% increase in the past month, further highlighting the positive impact of RIL’s investment.
Alok Industries, a Mumbai-based integrated textile business founded in 1986, specializes in the production of polyester and cotton products. The company is involved in every stage of the textile manufacturing process, from spinning to weaving, and offers a wide range of products including bedsheets, towels, completed fabrics, and more. Its clientele includes retailers, brands, and garment exporters in India and converter countries such as Bangladesh, Vietnam, and Sri Lanka.
In 2020, Alok Industries faced financial difficulties and underwent bankruptcy proceedings to repay its debts to creditors. During this process, RIL and JM Financial Asset Reconstruction Co. successfully acquired the company through an auction. As of the end of the September quarter, RIL owned 40.01% of Alok Industries, while JM Financial Asset Reconstruction Co. owned 34.99%.
The recent investment by RIL has not only provided a much-needed financial boost to Alok Industries but has also instilled confidence in the market. The stock’s surge to the upper circuit limit of 20% demonstrates the positive sentiment among investors towards the company’s future prospects.
Alok Industries’ financial performance has also shown signs of improvement. The company reported a net loss of Rs 175 crore in the September quarter, which is a decrease from the losses of Rs 192 crore in Q2 FY23 and Rs 226 crore in Q1 FY24. Furthermore, the operating profit for the company increased by 200% quarter-on-quarter to Rs 36 million in Q2 FY24.
The Indian textile industry, including Alok Industries, has been benefiting from the global shift away from China as international consumers seek alternative sourcing options. This trend has led to a rapid growth in textile and clothing exports from India, positioning Indian textile makers favorably in the global market.
In conclusion, Reliance Industries’ investment of Rs 3,300 crore in Alok Industries has had a significant positive impact on the company’s stock price and market perception. This investment not only provides a financial boost to Alok Industries but also reflects the growing confidence in the company’s potential. With its integrated textile business and favorable market conditions, Alok Industries is well-positioned to capitalize on the increasing demand for Indian textile products in the global market.
Disclaimer: We advise investors to check with certified experts before taking any investment decisions.