Reliance Industries To Raise Rs 53,125 Crore Via Biggest Rights Issue
Reliance Industries Ltd. will raise close to Rs 53,125 crore via a rights issue, the biggest ever, as India’s most valued company looks to strengthen its balance sheet.
The owner of the world’s largest oil refinery will issue more than 41 crore equity shares at Rs 1,257 apiece, according to an exchange filing. The rights issue—shares offered at a special price to existing shareholders in proportion to their ownership of old shares—is priced at a discount of 14.3 percent to closing price on April 30 and will lead to an equity dilution of 6 percent on the expanded equity base. The total equity base will increase to 675 crore.
The funds raised by the oil-to-telecom conglomerate via the rights issue is close to the total amount garnered by 13 companies in the financial year ended March 2020.
Rights Issue Math
Only those who own RIL shares as on the record date will be eligible for subscribing to the rights issue.
The company will issue one new share for every 15 held by the eligible shareholders. So, if an investor buys 15 shares of RIL at Rs 1,466 (closing price on April 30, 2020), then the effective cost per share after subscribing to the rights issue will be at a discount of only 1 percent to the closing price.
Why Fundraising Is Important
The RIL rights issue assumes significance as the company plans to be net debt free by the end of the ongoing financial year, the road map for which was laid out by Chairman Mukesh Ambani nearly eight months back.
RIL’s deal to sell a stake in its refinery business to Saudi Arabian Oil Co. —the key transaction aimed at lowering the debt—has been delayed. The deal is still pending as not only crude prices crashed, but also because the government petitioned court to halt a proposed stake sale.
Earlier this week, Facebook Inc. said it would invest nearly Rs 43,600 crore in RIL’s telecom and technology unit, Jio Platforms Ltd., for a 10 percent stake.
RIL’s net debt stood at close to Rs 161,035 crore as of March 2020. But after its deal with the social networking giant and rights issue, net debt is expected to fall to Rs 64,310 crore.
(Corrects an earlier version that misstated the number of fresh shares being issued.)