Insolvency sword hanging over Reliance Power

Reliance Power Limited’s annual report for 2025-26 shows the company entangled in insolvency proceedings on multiple fronts, with a lender to one subsidiary now pursuing the parent company itself under the Insolvency and Bankruptcy Code, 2016, and financial distress flagged at two other subsidiaries. Here is where each strand stood as of the report’s disclosures.

The Section 7 case against the parent company

An application was filed against Reliance Power under the IBC in April 2026 over an alleged default of debt worth US$165.41 million by Samalkot Power Limited (SMPL), a wholly owned subsidiary, guaranteed by the parent company. The Directors’ Report describes the application as not yet admitted. But the notes to the standalone and consolidated financial statements, part of the same annual report, go further: “subsequent to the year ended March 31, 2026, the lender has initiated the Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Company and the management is currently evaluating the appropriate legal course of action.” The two disclosures, filed within the same document, do not reconcile on whether the proceeding has moved from application to formal initiation.

The guarantee dispute behind it

The proceeding stems from a demand of Rs 1,81,994 lakh (Rs 1,819.94 crore), including interest, raised by SMPL’s lender by invoking the corporate guarantee Reliance Power had executed under an Amended and Restated Credit Agreement dated June 28, 2019. SMPL has contested the demand, initiating arbitration against the lender and facility agent Citibank N.A. before the London Court of International Arbitration on the ground that no debt had fallen due. That arbitration remains pending and the matter is sub judice, per the notes.

SMPL’s own financial position

The consolidated auditor’s report, by Pathak H.D. & Associates LLP, quantifies the subsidiary’s distress: a net loss of Rs 89.33 crore for the year ended March 31, 2026, a negative net worth of Rs 2,831.95 crore, current liabilities exceeding current assets by Rs 4,542.17 crore, and defaults on borrowings aggregating Rs 1,819.94 crore. Against this, SMPL has kept current on interest payments through June 30, 2025, provided for the remaining nine months of the year in its books, and received a binding offer from AM Green Energies B.V. to buy equipment for two undeveloped 750 MW modules of its planned 1,500 MW gas-based plant at Samalkot, Andhra Pradesh — a sale management is banking on to help address the lender’s claims. An Equipment Sale Agreement is still under discussion.

A second subsidiary under the same cloud

Rajasthan Sun Technique Energy Private Limited (RSTEPL), another subsidiary, carries a separate going-concern flag in the same report. It posted a net loss of Rs 728.50 crore for the year, a negative net worth of Rs 2,610.10 crore, and defaults on borrowings of Rs 2,113.09 crore, attributed to underperformance of the solar technology at its project. A 2022 Appellate Tribunal for Electricity ruling that would have compensated RSTEPL for reduced solar radiation and foreign exchange losses remains stayed by the Supreme Court, pending adjudication. The consolidated auditors issued a qualified opinion on the group’s accounts, stating they could not obtain sufficient evidence to support the going-concern assumptions used for either RSTEPL or SMPL.

One resolved precedent on record

The annual report also documents an insolvency matter that has already run its course. Lenders to Vidarbha Industries Power Limited (VIPL) — Axis Trustee Services Limited, acting for CFM Asset Reconstruction Private Limited and Axis Bank Limited — enforced a pledge over the entirety of VIPL’s equity capital on September 17, 2024, taking over its management and voting control. Reliance Power’s guarantee obligations toward VIPL’s debt were subsequently settled between the parties, and a Section 7 IBC application that CFM Asset Reconstruction had filed was withdrawn and dismissed on September 25, 2024 — a sequence the company appears to cite as precedent for how the SMPL matter could still be resolved outside formal insolvency.

Where the auditors land

Both the standalone and consolidated auditor’s reports carry a “material uncertainty related to going concern” paragraph referencing the SMPL guarantee dispute, though in each case the auditors state their opinion is “not modified” in respect of the matter — meaning it is flagged as a risk rather than treated as having already impaired the accounts. Reliance Power itself reported a standalone profit of Rs 13.37 crore for the year, against a loss of Rs 94.53 crore a year earlier.

Also See: Parliamentary panel recommends clearing corporations get overriding priority over IBC in Securities Markets Code