Reliance Power Limited — financial distress indicators
Financial-health summary
Reliance Power Limited's reported numbers place it in the 'Weak' financial-health band (distress score 58/100). The main indicators are operating profit does not cover interest, market-implied default probability >20% and very high leverage. Independently, the Ohlson accounting model puts its 1-year failure probability at 59% and the market-implied (Merton) default probability is 51.0%. In its favour: operating cash flow is positive over the latest 12 months.
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is 0.84×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Merton distance-to-default -0.02 σ → PD 51%.
Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.
Total debt is 6.2× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
O-score 0.35 → model probability 59%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Operating cash flow is positive over the latest 12 months.
📰 Recent news scan
- Reliance Power Share Price rise: price action and valuation - UnivestGoogle News · 2026-10-05
- RPOWER Q2 FY2026 Earnings: Revenue Edges Up to ₹7,204.23 Crore, Per-Share Loss Persists - Profit Growth Outlook - https://www.siam.in/Google News · 2026-10-05
- Reliance Power Shares Surge 18% as AI Push Sparks Rally; Stock Extends Gains for Second Day - India InfolineGoogle News · 2026-07-01
- Reliance Power shares soar 18%, snap 4-day losing streak. What’s triggering the sharp surge? - The Economic TimesGoogle News · 2026-07-01
- Reliance Power Surges 18% After Eyeing Foray Into AI, New-Age Tech - HDFC SkyGoogle News · 2026-07-01
⚖️ Indian legal pathway — the IBC, 2016
How insolvency starts
- A financial creditor (§7), an operational creditor after a demand notice (§§8–9) or the company itself (§10) can apply to the NCLT once a default of at least ₹1 crore occurs (§4).
- On admission a moratorium (§14) stops suits and recovery; the board is suspended and an insolvency professional runs the company.
- The Committee of Creditors approves a resolution plan with 66% of voting share (§30(4)) within an outer limit of 330 days (§12); otherwise liquidation (§33) under the §53 waterfall — equity ranks last. Defaulting promoters are generally barred from bidding (§29A).
Earlier warning stages
- RBI's Prudential Framework for Resolution of Stressed Assets (7 June 2019): lenders must review a borrower within 30 days of default and implement a resolution plan, or provide more.
- Listed companies must disclose loan defaults to exchanges under SEBI (LODR); a rating downgrade to “D” is a public signal.
- Auditors must report going-concern uncertainty (SA 570 / Ind AS 1).
Frequently asked questions
What do Reliance Power Limited's financial-health indicators show?
As of 2026-10-09, Reliance Power Limited's public financial data places it in the 'Weak' band with a distress score of 58/100, driven by operating profit does not cover interest, market-implied default probability >20% and very high leverage. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Reliance Power Limited's financial distress score?
58/100 ('Weak'). Ohlson O-score 0.35 (model 1-year failure probability 59%). Merton distance-to-default -0.02 σ (model default probability 51.0%).
What works in Reliance Power Limited's favour?
Operating cash flow is positive over the latest 12 months.
How are shareholders treated if a company enters insolvency?
Under the IBC the Committee of Creditors controls the resolution; the §53 waterfall pays secured creditors and workers first and equity last. In most resolution plans existing shareholders are wiped out or left with a token stake, and the company may be delisted.
Other Utilities & Power companies with distress indicators
- GVK Power & Infrastructure Limited (GVKPIL)Very weak 80/100
- Energy Development Company Limited (ENERGYDEV)Weak 55/100
- Reliance Infrastructure Limited (RELINFRA)Watch 36/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.