Reliance Infrastructure hit an upper-circuit limit of 5% at Rs 24.25 after the company said it won major arbitration award of Rs 1,250 crore against Damodar Valley Corporation.
In an exchange filing on Monday, Reliance Infrastructure said it won a major arbitration award of Rs 1,250 crore against Damodar Valley Corporation (DVC), a Government of India undertaking.
A three-member Arbitration Tribunal unanimously gave the award in favour of Reliance Infrastructure on 21 December 2019. Reliance Infrastructure was the engineering & construction contractor for DVC's 2 x 600 MW Raghunathpur thermal power project in West Bengal commissioned in 2012.
The Arbitration Tribunal awarded the case in favor of Reliance Infrastructure and directed Damodar Valley Corporation to pay Rs 896 crore and return the bank guarantees of Rs 354 crore within four weeks or pay additional interest, at the rate of 15% per annum, for any delay in payment beyond four weeks. Pursuant to the recent Niti Aayog circular, Reliance Infrastructure will request DVC to pay 75% of the Arbitral Award against bank guarantee immediately. The proceeds will be used to pay lenders and reduce the debt of the company.
Reliance Infrastructure was the E&C contractor of Damodar Valley Corporation's 2 x 600 MW Raghunathpur Thermal Power Project in West Bengal with a contract value of Rs. 3,750 crore. After emerging the lowest bidder, Reliance Infrastructure was issued Letter of Acceptance on 11.12.2007 and unit 1 and unit 2 were to be commissioned in 35 and 38 months respectively.
During execution, Reliance Infrastructure faced various impediments such as non-availability of land, hindrances at project site on account of local agitations, unavailability of inputs from DVC viz. water and coal etc. The company commissioned the project. Unit 1 was commissioned on May 15, 2015 and Unit 2 was commissioned on on February, 23, 2016.
The company raised several claims on DVC in respect of delay and hindrances faced by it in execution of the project. However, DVC sought to levy liquidated damages upon the company for failure to adhere to the contractual schedule. DVC also filed a counter-claim and sought to levy liquidated damages, claims towards loss of generation, additional interest on loans and other claims.
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The Arbitral Tribunal over 107 sittings dwelt on the rival claims of the parties and on 21 December 2019 pronounced its unanimous award in favour of Reliance Infrastructure.
Shares of Reliance Infrastructure jumped 10.22% in two trading sessions to its current market price of Rs 24.25 from its recent closing low of Rs 22 on Thursday, 19 December 2019.
The Nifty 50 index fell 6.90 points or 0.06% at 12,264.90.
On the technical front, the stock's RSI (relative strength index) stood at 44.885. The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.
The stock was trading below its 50-day moving average (DMA) placed at Rs 28.75 and 200-day moving average (DMA) placed at Rs 66.62. Both these levels would serve as resistance levels in the near term.
On a consolidated basis, Reliance Infrastructure net profit slumped 93.6% to Rs 280.35 crore on 1.7% increase in net sales to Rs 5,822.48 crore in Q2 September 2019 over Q2 September 2018.
Reliance Infrastructure is a utility company with presence across the chain of power businesses, such as generation, transmission, distribution and power trading.
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