Mukesh Ambani’s Reliance Industries announces largest rights offer of Rs 53,125 crore

RIL has approved raising of over Rs 53,000 crore from its shareholders via rights issue, the biggest rights issue ever by an Indian company. 

May 1, 2020 12:18 IST
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The Reliance Industries Limited has approved raising of over Rs 53,000 crore from its shareholders through rights issue, its first such issue in almost three decades and the biggest-ever by an Indian company. This was decided during the board meeting of the Reliance Industries on April 30, 2020. 

The Reliance board has approved the issuance of equity shares worth Rs 10 each of the company on rights basis to eligible equity shareholders as on the record date of an issue size of Rs 53,125 crore. The information was shared by Reliance Industries in a notification. 

The RIL rights issue is priced at Rs 1,257, a discount of Rs 210 or 14 per cent from the last close.

Significance

The news comes after Facebook revealed its plans to spend $5.7 billion to buy a 9.99% stake in Reliance’s digital arm.  While some analysts are perplexed as to why Reliance would want additional capital after getting equity infusion from Facebook, others feel that the rights issue would be a positive development for the company, reflecting the management’s commitment to eliminating Reliance’s net debt of about $22 billion by March 2021.

Key Highlights 

The shareholders will be able to subscribe to one equity share for every 15 equity shares held by eligible shareholders as on the record date.

The promoters, the controlling stakeholders,  hold a little over 50 percent of stakes in Reliance will be subscribing to the full extent of their aggregate rights entitlement. The promoters will also be  subscribing to all the unsubscribed shares in the issue.

The rights issue follows the Rs 43,600 crore worth deal with Facebook to sell off a 10 percent stake in its Jio Platforms. Reliance Industries plans to be debt-free by March 2021 and the proceeds from these share sales will help the company reduce its liabilities significantly.

Background

Reliance’s major deal with Saudi Aramco, in which the world's largest oil exporter was expected to buy at least 20 percent stake in Reliance Industries' oil refineries and petrochemical business, had to be shelved due to coronavirus pandemic. The deal was expected to be closed by March 2020. 

The stake sale of RIL’s oil refinery and chemical business was expected to fetch around $75 billion or over 5.3 lakh crore. The announcement was made by RIL Chairman Mukesh Ambani during the 42nd Annual General Meeting of Reliance Industries on August 12, 2019.

Reliance had acquired major debt when it ventured into the telecom sector with the launch of Jio in late 2016, which offered free voice calls and internet data at extremely cheap rates. The launch of Jio transformed the telecom sector, bringing down the rates of data and calls major across different telecom companies.

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