Anil Ambani-owned Reliance Infrastructure share price dips 5% after THIS reply on 155mm artillery shells

Anil Ambani-Owned Reliance Infrastructure Share Price Dips 5% After THIS Reply on 155mm Artillery Shells

Mumbai, June 5, 2025 – Shares of Reliance Infrastructure, part of the Anil Ambani Group, plunged nearly 5% today following a statement by the company addressing concerns over its supply contract for 155mm artillery shells with the Indian defense sector. The reaction from investors signals heightened apprehension about the firm's future order pipeline amid ongoing scrutiny by defense procurement agencies.

Context: Reliance Infrastructure and the Defense Sector

Reliance Infrastructure (RInfra), a major player in India’s infrastructure and defense manufacturing segments, has been working to establish a foothold in the domestic defense production space, including artillery shell manufacturing. The 155mm artillery shells are critical components for the Indian Army's artillery guns, representing a lucrative and strategically vital segment.

The company had earlier announced partnerships and contracts aimed at supplying these artillery shells under the government's 'Make in India' initiative, which seeks to boost indigenous defense manufacturing.

The Statement That Shook the Market

Today, RInfra released an official reply clarifying certain ambiguities regarding the timeline and scale of the 155mm artillery shell supply contracts. The company acknowledged delays in some production phases, citing technical and supply chain challenges but assured stakeholders that it remains committed to fulfilling its contractual obligations.

However, the statement also hinted that some orders may be scaled down or delayed due to changes in government procurement priorities and competitive pressures from other defense manufacturers.

Market Reaction: Sharp Sell-Off

In response, Reliance Infrastructure’s share price tumbled 5%, falling from ₹26.40 to close at ₹25.10 on the Bombay Stock Exchange (BSE). The sharp sell-off reflected investor concern over revenue uncertainty and the potential impact on the company's defense order book.

Market experts noted:
“Defense contracts form a significant portion of RInfra's upcoming revenue. Any delays or reductions in order volumes will adversely impact the company's near-term earnings and cash flows,” said Anil Mehta, a senior analyst at Motilal Oswal Securities.

Analyst Insights: What Lies Ahead?

Analysts are divided on the long-term implications of the announcement. While some maintain a cautious stance, others highlight the underlying strengths of Reliance Infrastructure’s diversified business model.

Positive factors cited include:

• The Indian government's continued push for defense indigenization.

• Reliance Infrastructure’s established presence in infrastructure projects and power distribution, providing some cushion against volatility in defense orders.

However, concerns remain:

• The defense procurement environment in India is becoming more competitive with state-owned and private players ramping up capabilities.

• Execution risks related to complex manufacturing timelines and technology transfers.

“Investors should closely watch government tender announcements and contract awards in the coming quarters to gauge the real impact on RInfra’s defense segment,” added Mehta.

Broader Market Context

Reliance Infrastructure is currently navigating a challenging environment marked by:

• Rising raw material costs affecting manufacturing margins.

• Tightened capital expenditure cycles in infrastructure projects.

• Increasing regulatory scrutiny on defense contracts in India.

Despite these headwinds, the company has shown resilience through its diversified business portfolio and efforts to cut costs and optimize operations.

Investor Outlook: Cautious Optimism Recommended

While the recent dip has caused unease, experts suggest a measured approach for investors holding or considering Reliance Infrastructure shares.

“Given the company's fundamentals and strategic position, the dip might present a buying opportunity for long-term investors,” said Ruchi Sharma, Portfolio Manager at ICICI Prudential AMC. “However, risk-averse investors should await clearer signals from the government’s defense procurement plans and the company’s execution updates.”

Investors should also consider the overall sectoral momentum, including government defense budgets and infrastructure spending trends, before making portfolio decisions.

Reliance Infrastructure’s recent clarification on its 155mm artillery shell contracts has triggered a notable market reaction, highlighting investor sensitivity to defense order flows and execution risks. As the company continues its transition toward becoming a significant defense manufacturer alongside its infrastructure ventures, the coming months will be critical in shaping its financial trajectory.

Market participants will keenly watch for contract renewals, government policy signals, and quarterly earnings to assess if Reliance Infrastructure can overcome near-term challenges and capitalize on India’s growing defense manufacturing ambitions.