Vijay Kedia Buys 4,000,000 Shares of Reliance Infrastructure. Here's Why

One of the largest infrastructure companies in India, Reliance Infrastructure recently filed its shareholding pattern for the quarter ended March 2024.

In a surprising stance, ace investor Vijay Kedia has made a fresh entry in the counter.

Data from the BSE shows that Vijay Kedia now holds 1.01% stake in Reliance Infrastructure or 4,000,000 shares worth Rs 755 million (m).

Prior to this in the December 2023 quarter, Vijay Kedia's name was not present in the shareholders list.

Before we move on to understand why the seasoned investor made a huge bet on a company that's known for its troubles, let's look at who Vijay Kedia is.

Who is Vijay Kedia?

Vijay Kishanlal Kedia is an Indian investor and trader based out of Mumbai. His company - Kedia Securities - is the largest shareholder (after the promoter) in several listed companies.

Kedia has been involved in the Indian stock market since the age of 19. He has been described by many as a 'market master'.

To point out a few of his investments, he bought ACC at Rs 300 in 1992-93 and sold the stock around Rs 3,000 within a year and a half.

During the years 2004 and 2005, he picked several multibagger stocks which gave returns of over 1,000% in the next 10-12 years. Few of these stocks were Atul Auto, Aegis Logistics, and Cera Sanitary.

Why Did Vijay Kedia Buy Shares of Reliance Infrastructure?

As we mentioned above, as of March 2024, Vijay Kedia holds over 1% stake in Reliance Infra.

Every quarter, companies must report the names of shareholders holding over 1% stake, as part of their filings.

Kedia recently made a fresh entry to this counter as before this, he did not have any stake in the Reliance group company.

While we do not know for sure why exactly Vijay Kedia bought into this counter, there are some explanations...

Reliance Infra recently settled dues with ICICI Bank, which was a big overhang on the company as well as investors.

In the past, Reliance Infra has come under scrutiny owing to its unavailability to settle dues.

The recent obligation that it settled was with respect to borrowings of Reliance Power.

Apart from this, another reason that Kedia may be factoring in is the company's presence in the railway and infra sector.

Being one of the largest infra companies, Reliance Infrastructure is engaged in developing infrastructure projects through various Special Purpose Vehicles (SPVs) in several sectors.

These include metro rail, power, airport, roads, and defence.

The company has executed the Mumbai Metro line one project on build, own, operate and transfer basis.

It is also a leader in the power businesses i.e. generation, transmission, distribution, and power trading.

Since investors are already factoring in a BJP victory, market experts are of the view that the sectors that did well in 2023 (infra, rail, defence, power) will continue to do well this year as well because the Modi 3.0 campaign is off to a big bang start.

The government has already announced major expansion plans for the railway sector.

All these factors are expected to keep infra companies like Reliance Infra in a sweet spot.

There are some concerns though...

Reliance Infrastructure has had significant debt on its books over the years, which has posed some challenges.

It does not have a history of reporting stable and consistent profits as well.

Financial Snapshot

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Net Sales	1,97,310	1,94,617	1,72,209	1,89,817	2,13,396
Growth (%)	7%	-1%	-12%	10%	12%
Operating Profit	88,586	33,267	44,499	25,491	17,342
OPM (%)	45%	17%	26%	13%	8%
Net Profit	-24,268	7,712	11,253	-9,989	-32,212
Net Margin (%)	-12%	4%	7%	-5%	-15%
ROE (%)	-60	0	0	0	0
ROCE (%)	6.1	26.4	85.6	32.1	-5.6
Dividend (Rs)	0	0	0	0	0
Debt to Equity (x)	-7.6	-2.1	-1.5	-1.5	-0.9

Data Source: Ace Equity

The Anil Ambani group company was recently under scrutiny after the Supreme Court overturned its order in a dispute with the Delhi Metro Rail Corporation (DMRC).

Owing to this order, shares of the company have seen a steep fall recently.

Nevertheless, the company could make a comeback like Suzlon... who knows.

Suzlon's was a similar case... a company with high debt, string of losses, troubles mounting up. But as the wind energy sector gained traction, the company's business started showing signs of a turnaround.

Will we see a similar comeback from Reliance Infra? Is the Anil Ambani company poised for a turnaround owing to its presence in high growth sectors like railway, etc.?

Only time will tell.

How Reliance Infrastructure Share Price has Performed Recently

In the past 5 days, Reliance Infra shares are down 7%.

In a month, the stock price has fallen around 25%.

Reliance Infra has a 52-week high of Rs 308 touched on 4 April 2024 and a 52-week low of Rs 131 touched on 19 May 2023.

In the past one year, Reliance Infra share price is up 18%.

Here's a table comparing Reliance Infra with its peers -

Comparative Analysis

Company	Reliance Infra	Adani Energy Sol.	Power Grid	PTC India	Torrent Power
ROE (%)	0	13.8	19.4	10.4	20.7
ROCE (%)	-5.6	10.5	13	9.9	19.1
Latest EPS (Rs)	-103.3	10.4	17.4	17.1	38.5
TTM PE (x)	0	99.8	16.2	12.8	38.9
TTM Price to book (x)	-0.6	9.5	2.9	1.3	5.9
Dividend yield (%)	0	0	5.2	3.6	1.7
Industry PE	26.4
Industry PB	3.8

Data Source: Ace Equity

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...