28th January 2023

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RELIANCE INDUSTRIES RIGHT ISSUE

Reliance Industries Ltd (RIL) has designated nine investment banks for its planned Rs. 53 215 million rupees ($ 7 billion) rights issue. These Banks designated to manage India’s biggest stock sale include foreign banks Citigroup and Morgan Stanley and domestic bankers Kotak Mahindra Capital, JM Financial Ltd, Axis Capital and ICICI Securities.

Last week, RIL AGM approved the issuance of 10 / – capital shares of each of the issue size companies at Rs 53.125 billion through the rights issue to the eligible shareholders of the company. The rights issue price was set at 1,257 per share and the proportion of shares at 1:15.

The proposed rights offering will be the first of RIL in three decades. The issue will be structured in partially paid-up shares and will allow shareholders to gradually eliminate the disbursement of their investment over a period of time. Diversified profit flows and a cautious balance sheet place Reliance in an advantageous position to meet today’s macroeconomic challenges. S&P and Moody’s have confirmed the investment grade ratings of Reliance.

As part of the proposed rights offering, Reliance shareholders will be offered one new share for 15 shares held in Rs. 1,257 each. It is the first successful issue of the most precious Indian company in three decades. The issue will be structured in partially paid-up shares and will allow shareholders to gradually eliminate the disbursement of their investment over a period of time. Shareholders wishing to subscribe to the issue will have to pay 25% of the demand and the rest in one or more installments.

At 50% shareholding, Mukesh Ambani, Asia’s richest man, will have to pump in at least Rs.26,600 crore to subscribe to his portion of the rights issue. Ambani and other controlling shareholders have pledged to buy the full extent of their entitlement and also subscribe to all unsold shares in the rights issue.

The previous biggest rights issue share sales in India were of Bharti Airtel Ltd and Vodafone Idea Ltd, both of whom raised around Rs.25,000 crore each. The biggest initial share sale was that of Coal India Ltd, which raised Rs.15,200 crore in 2010, while State Bank of India’s Rs.15,000 crore sale to institutional investors in 2017 was the biggest such sale.

The rights offering is part of RIL’s plans to become a zero-debt company by the end of March 2021. Reliance’s net debt was Rs 1.53 trillion as of December 31. The alliance is raising funds at a breakneck pace as it attempts to reduce its debt and secure its capital needs amid a severe recession in the global economy. The collapse in oil prices and the demand for fuel due to coronavirus bottlenecks have resulted in the largest drop in profits in nearly two decades in its main chemicals and refining division.

Meanwhile, Bloomberg announced on Thursday that RIL is planning to sell a 4.9% stake in Asian Paints Ltd valued at around $ 989 million as part of its debt reduction efforts. The stake will be sold through a series of block deals, the report added. The size and timing of any potential sales have not been finalized and Reliance may decide not to reach an agreement.

RIL has announced that it has agreed to sell a 1.15% interest in Jio Platforms Ltd, which houses its telecommunications and digital businesses, to private equity investor Silver Lake Partners for 5,655.75 million rupees a few days after selling Facebook Inc.’s largest stake. Facebook bet $ 5.7 billion to buy just fewer than 10% of the stake.

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