Reliance Industries (RIL) said on Saturday that its 442.6 million share rights offer would be open for subscription between May 20 and June 3. India’s most valuable company is raising Rs 53,125 crore in fresh capital through rights issue. RIL will initially issue partially paid shares to raise Rs 13,250 crore and the balance will be raised later.
The rights issue price has been set at Rs 1,257 per share, a discount of about 14 percent on the final closing price of Rs 1,459. The company had set May 14 as the record date for the rights issue, which meant that shareholders would be eligible to apply on that day. Shareholders will be able to apply for one share for every 15 shares.
The company said that initially they would have to pay a share of Rs 314.25 and pay the remaining Rs 942.75. Partially paid shares will be traded separately until they are converted into fully paid shares.
RIL’s rights issue – the first after almost three decades – is part of a strategy to become a zero net loan company by March 2021.
As of March 2020, RIL had a gross debt of Rs 3.36 trillion and net debt of Rs 1.61 trillion.
At Rs 53,125 crore, the rights issue will be India’s largest equity fund. However, it remains to be seen when the company will raise the entire amount. The current record of the biggest rights issue is with Vodafone Idea and Bharti Airtel, which competes with RIL in the telecom business. Both telecom operators raised Rs 25,000 crore last year through offering their rights.
More than Rs 53,125 crore will be invested by the promoters, who currently hold a 50.07 percent stake in the company. The promoters have also fully outlined the issue of rights – to reduce any demand.
RIL currently has more than 2.6 million public shareholders. Market experts said the participation of large institutional shareholders hindered the success of the rights issue. Some of them include Life Insurance Corporation (six percent); Europacific Growth Fund (3.05 per cent), SBI MF (1.34 per cent) and Singapore Government (1.24 per cent).
Due to the Kovid-19 lockdown, some rules governing the rights issue have been relaxed. The Ministry of Corporate Affairs (MCA) has stated that sending notices through postal or courier services will not be seen as a violation of the Companies Act 2013. In addition, market regulator SEBI has allowed electronic transmission of offer letters, application forms and other issue material to shareholders.
RIL shares have fallen three per cent year-on-year. The stock has been on a roller-coaster ride this year, reaching a low of Rs 873 in March and then reversing 78 per cent to Rs 1,557. The company’s shares fell nearly six per cent this week following the opening of the rights issue.