Reliance Industries rights issue soon, as Mukesh Ambani moves closer to zero debt target

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Updated: Apr 28, 2020 10:24 AM

Reliance Industries Ltd, on a quest to become a net-zero-debt company, has said that it will consider a rights issue of equity shares in its board meeting on 30 April 2020.

RIL Chairman Mukesh Ambani said he has pledged to make the company a ‘zero-net-debt’ firm.

Reliance Industries Ltd, on a quest to become a net-zero-debt company, has said that it will consider a rights issue of equity shares in its board meeting on 30 April 2020. Mukesh Ambani’s RIL is India’s most valuable listed firm, with a market capitalization of Rs 9.25 lakh crore. It is also one of the highest indebted companies in India, with a gross debt of over Rs 3 lakh crore, and net debt of over Rs 1.5 lakh crore. It is also one of the most cash rich companies with over Rs 1.3 lakh crore cash in hand. Earlier, in August last year, RIL Chairman Mukesh Ambani said he has pledged to make the company a ‘zero-net-debt’ firm.

RIL, in a notice to stock exchanges late yesterday, said that it will consider a proposal to issue equity shares to existing shareholders on Rights basis, subject to law and regulation. The company did not share details of the proposed issue such as the size of the issue, proposed equity dilution, date, etc. However, considering RIL’s current market cap of Rs 9.25 lakh crore, and India’s largest retail shareholder base that it has, one can expect the rights issue to provide it with sufficient firepower to cut the debt.

Analysts believe the move reflects promoter’s unflinching faith in the medium to long term prospects of various businesses. “With consumer focusing businesses like digital telecom & retail achieving global scale, with global behemoths vying with each other to partner RIL; this is an apt opportunity for current shareholders to participate in the likely value unlocking of various businesses over the next couple of years,” said Ajay Bodke, CEO, PMS Prabhudas Lilladher.

Earlier last week, Reliance Industries announced a mega deal to sell a 10% equity stake in its telecom venture Reliance Jio for Rs 43,574 crore to Mark Zuckerberg’s Facebook Inc. Reliance Jio has seen investments to the tune of well over Rs 2 lakh crore since inception, and is Mukesh Ambani’s big bet on India’s digital future. Another mega deal, with oil giant Saudi Aramco to sell it equity stake in RIL’s flagship oil and gas business, is in waiting.

After opening with gains RIL share price slipped into the red, down almost 2% to trade at Rs 1404 per share.

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