Mukesh Ambani-led Reliance Industries’ Rs 53,125-crore fund raising initiative to curtail debt saw huge interest from investors. The 422.6-million share offering garnered bids for 671.1 million shares, making it one of the most subscribed rights offering in the country.
Market players said the strong demand for the rights issue underscored investors faith in the long-term prospects of the company, which is trying to diversify from traditional oil and gas business into new-age digital business. The huge interest was also driven by attractive discount between the rights issue price and current market price for the shares of RIL. The stock on Wednesday closed at Rs 1,542, a premium of nearly 23 per cent to the rights issue price of Rs 1,257.
In recent weeks, RIL’s stock price has been underpinned by investments of over Rs 78,000 crore into its digital services unit Jio Platforms from five global firms including Facebook. Also strong momentum in the secondary market, which has seen the benchmark Sensex climb 11 per cent in just six trading sessions, has helped its stock price.
RIL rights issue was first announced in April when the investor sentiment had taken a beating due to selloff triggered by the covid-19 pandemic. Despite that, the company managed to achieve several first. The offering was first to test the rights entitlement (RE) trading platform, which allowed eligible shareholders to sell their entitlement for a price. The seven-day trading window, saw 114 million RIL REs get were traded, with total trading volume at over Rs 2,200 crore, with huge interest from global investments firm including Societe Generale.
Also, RIL is the first major company to conduct its rights issue in multiple tranches. Initially, applicants have to pay Rs 314.25 per share. Investors will be issued partly paid up share with face value Rs 2.5 each, which will be traded separately. Another Rs 314.25 per share will have to be paid May next year and the balance Rs 628.5 in November 2021. The cumulative size of Rs 53,125 crore will make the rights offering biggest-ever in the domestic market. However, telecom majors Bharti Airtel and Vodafone Idea had raised Rs 25,000 crore each at one shot through their rights offering in May last year. After the rights issue allotment takes place, RIL partly paid-up shares will traded separately on stock exchanges.
RIL has embarked upon a journey to become zero-debt company by the end of the year—much before the rights programme gets concluded.
At the end of March 2020, RIL had net debt of Rs 1.61 trillion. The company has lined up slew of divestments to bring down this debt. This includes $15-billion stake sale in oil-to-chemical business to Saudi Aramco, world’s largest company by market cap; Rs 7,000 crore worth of stake sale in fuel retailing business to BP; about Rs 1.07 billion worth of investments in Jio Platforms—bulk of which have already been confirmed. The company also plans to generate over Rs 50,000 crore cash from operations between April and December.
“RIL has successfully managed to position itself as a zero-debt tech company in an environment of the virtual economy taking precedence over real. This has the added advantage of taking attention away from a weaker near-term refining outlook,” said Edelweiss analysts Jal Irani in a note last week.