The rights issue, biggest ever to enter the Indian equity markets, will remain open for eligible investors for 14 days and is expected to see positive response despite the troubled times that stock markets have seen in the past couple of months.
Reliance Industries Limited (RIL) share price zoomed 2% on the initial hour of trade as the Rs 53,124 crore rights issue of the Mukesh Ambani-led company opened on Wednesday morning. The rights issue, biggest ever to enter the Indian equity markets, will remain open for eligible investors for 14 days and is expected to see positive response despite the troubled times that stock markets have seen in the past couple of months. RIL, India’s most valuable company, is looking to cut its net-debt to zero by the end of this fiscal year and is looking to aid that with the rights issue and the consecutive deals that it has signed with global investors for its telecommunications arm, Jio Platforms. Here’s all you need to know about the rights issue.
Eligibility and Price: To be able to subscribe to the rights issue, you must have had at least 15 shares on the record date which was set as May 14. According to RIL’s Board, the shares will be offered at 1:15 ratio, so having at least 15 shares is what makes you eligible for subscribing to the rights issue. The shares are being offered at Rs 1,257 per share, translating to a 12% discount from the current market price.
Payment structure: Interestingly, investors looking to subscribe to the issue will not be asked to pay the entire amount in one go, which would have been a difficult task at this juncture. RIL has asked investors to pay only 25% at the time of subscription. Of the remaining 75%, investors have been asked to pay 25% in May 2021 and the other 50% in November next year. As a promoter and 50 percent shareholder, Mukesh Ambani will have to pump in 26,600 crores for his portion of the rights issue, according to brokerage firm Angel Broking.
How to apply: Investors need to consult their bank if they have the option, you can apply through them. Otherwise, investors can apply through an ASBA (Applications Supported by Blocked Amount). Other options include applying through a courier of the Composite Application Form (CAF) from RTA (Registrar and Transfer Agent) of the company.
What the experts have said so far:
In my opinion, this is the perfect opportunity for investors to participate in the medium-term growth story for the company. As indicated by the Chairman (Mukesh Ambani) in the last AGM, the firm is well on its way to become a zero-net-debt firm by March 2021, even the consumer-focused businesses I think will very soon start contributing up to 50% in the profits of the company. ~ Ajay Bodke, CEO (PMS) Prabhudas Lilladher.
Investors should subscribe, they (Reliance Industries) have a great idea, have great partners and good investors so there’s a huge opportunity for them to execute so I think with all these cash infusions they are very well capitalized to invest in the opportunity they see, so the outlook is very positive. ~ Nilesh Shah Envision MD & CEO Envision Capital.
Clearly the point is the slew of deals they have done. Rerating of the stock that is happening and has happened over the time as well. People though core business will suffer and eventually the company will suffer but post the deals they have enough cash flows. They also have other deals on the table so they will have cash during the current times. How the situation is right now, the companies with surplus liquidity will be preferred. ~ Abhimanyu Sofat Head of Research, IIFL Securities