- Reliance Power Q2 Results: Why Did Profit Fall?
- Reliance Power's Debt Story: One Success, Several Unresolved Problems
- Four Problems That Investors Should Not Ignore
- Can Reliance Power Fix These Problems?
- Our Take
Reliance Power shares fell nearly 4% today, adding to investor concerns following the company's Q2 FY27 results. The company reported a 65.53% year-on-year decline in consolidated net profit to ₹30.10 crore, while revenue fell 7.29% to ₹1,830.04 crore.
However, the bigger concern goes beyond the quarterly earnings decline. Reliance Power has been highlighting its efforts to reduce debt, including the repayment of ₹1,318 crore of loans by its subsidiary, Rosa Power. Yet, the wider group continues to face significant financial challenges, including loan defaults at other subsidiaries, an insolvency case linked to a corporate guarantee and uncertainty over the recovery of troubled projects.
This raises an important question: If Reliance Power is making progress on debt reduction, why are its financial problems far from over?
To understand this, we need to look beyond the headline profit and examine the financial position of its subsidiaries, the debt they continue to carry and whether the company's recovery efforts are enough to resolve these problems.
Reliance Power Q2 Results: Why Did Profit Fall?
At first glance, the results look disappointing. Revenue from operations fell from ₹1,974.03 crore to ₹1,830.04 crore. Other income also declined from ₹93.07 crore to ₹59.83 crore.
However, the more important detail lies in the company's expenses. Total expenses stood at ₹1,895.78 crore, exceeding total income of ₹1,889.87 crore. This resulted in a loss of ₹5.91 crore before exceptional items and tax.
The situation worsened after Rosa Power, a subsidiary, paid ₹25.32 crore as a charge for repaying its loan early. This pushed the consolidated loss before tax to ₹31.23 crore.
So, how did Reliance Power still report a net profit of ₹30.10 crore?
The answer is a tax benefit. The company recorded a deferred tax credit of ₹95.94 crore, partly offset by ₹34.61 crore in current tax expense. This resulted in a net tax benefit of ₹61.33 crore.
In simple words, the company reported a profit after tax despite making a loss before tax. Therefore, investors should not treat the reported net profit as proof that its underlying profitability has improved.
Reliance Power's Debt Story: One Success, Several Unresolved Problems
Here is where the story gets interesting. In November 2024, Reliance Power announced that its subsidiary, Rosa Power, had repaid ₹1,318 crore of loans to Varde Partners and achieved zero bank debt status.
This was a meaningful achievement. However, there is an important distinction: Rosa Power becoming debt-free does not mean the entire Reliance Power group is debt-free.
Think of a family with several businesses. One business may repay all its loans, but the family can still face financial trouble if another business has large unpaid debts and the family has guaranteed those loans. Something similar is happening here.
Reliance Power continues to face financial and legal challenges linked to other subsidiaries. Four developments deserve particular attention.
Four Problems That Investors Should Not Ignore
1. Samalkot: A ₹1,892 Crore Guarantee Dispute
Samalkot Power operates a gas-based power project in Andhra Pradesh. The project faced difficulties because of the shortage of domestic gas, affecting its ability to operate profitably.
The bigger problem is its outstanding debt.
The lender demanded approximately ₹1,892.39 crore, including interest, by invoking a corporate guarantee provided by Reliance Power.
The lender subsequently initiated insolvency proceedings against the parent company under Section 7 of the Insolvency and Bankruptcy Code (IBC).
This is important because the financial problem of a subsidiary has now created a direct legal challenge for Reliance Power itself. The application has been initiated, but investors should distinguish this from an insolvency process being formally admitted by the tribunal.
2. Rosa Power: A Loan Repayment Cost and Unpaid Electricity Dues
Rosa Power's debt repayment was a positive development, but it came with a cost. During Q2 FY27, the subsidiary paid ₹25.32 crore as a loan prepayment charge.
There is another issue. Uttar Pradesh Power Corporation Limited (UPPCL), its electricity buyer, deducted ₹157.55 crore from Rosa Power's electricity bills.
Rosa disputes these deductions and believes the amount is recoverable. However, until the dispute is resolved and the money is collected, it remains an amount tied up in receivables rather than cash received.
3. Rajasthan Sun Technique: A Troubled Solar Project
Rajasthan Sun Technique Energy (RSTEPL) operates a concentrated solar power project. According to the company's disclosures, the technology used at the project failed to deliver the expected results despite several improvement measures. This led to continuous losses and loan defaults.
As of September 30, 2026, the subsidiary had defaulted on borrowings of approximately ₹2,335.47 crore and had a negative net worth of ₹2,729.54 crore.
There is a possible route to recovery. A power tribunal had granted compensation to the subsidiary for reduced solar radiation and foreign exchange variation. However, the procurers (the electricity buyers) challenged the decision in the Supreme Court, which stayed its implementation.
Until this dispute is resolved and the business improves, the subsidiary's financial position remains under pressure.
4. ED Proceedings and Restrictions on Assets
Reliance Power also faces regulatory and legal uncertainty.
In October 2026, the Enforcement Directorate (ED) issued a provisional seizure order covering shares worth approximately ₹2,026.65 crore in Sasan Power, a wholly owned subsidiary, and certain bank balances worth ₹6.16 crore.
The company has disputed the allegations and stated that the shares were already pledged to Power Finance Corporation. Separately, investigations relating to an alleged fake bank guarantee submitted to SECI and an ongoing SEBI forensic audit add to the uncertainty.
These are ongoing matters, not proof of wrongdoing. However, investors need to watch their eventual outcomes and possible financial implications.
Can Reliance Power Fix These Problems?
Management is pursuing asset monetisation to address some of the financial stress.
Samalkot entered into an agreement in June 2026 to sell equipment from two modules of its power plant, with a combined capacity of 1,508 MW. The buyer has provided a $10 million standby letter of credit. However, the proposed sale still requires lender approval. Management expects the transaction to address outstanding lender obligations if completed.
The company has also appointed Rajendra Vishwanath Pawar as its new CFO. His experience includes financial restructuring and insolvency resolution.
These steps indicate that the company is working towards resolving its problems. But plans and appointments are not the same as completed debt resolution.
There is also a serious warning from the auditors. Their review highlighted material uncertainty that may cast significant doubt on the group's ability to continue as a going concern, particularly because of Samalkot and Rajasthan Sun Technique.
In simple words, the auditors are questioning whether these businesses can continue meeting their obligations without successfully arranging funds, generating cash or resolving their debt problems.
Our Take
Reliance Power's Q2 results highlight an important distinction: reducing debt in one subsidiary does not automatically remove financial risks across the group.
The company's recovery will depend on whether it can resolve the Samalkot guarantee dispute, complete the proposed equipment sale, improve Rajasthan Sun Technique's operations and collect Rosa Power's disputed electricity dues.
Investors should also track the outcome of the ED proceedings and whether the group can generate sustainable profits without depending on large tax benefits.
The bottom line: Reliance Power has made progress in reducing debt at Rosa Power, but its wider financial recovery remains incomplete. The real test is whether it can turn its debt-reduction efforts into stronger cash flows, healthier subsidiaries and consistent profitability. Until these improvements become visible in the financial statements, investors should look beyond debt-free headlines and examine the risks across the entire group.