Reliance Industries Ltd’s Rs 53,125-crore shares rights issue, the first of its kind in almost 30 years, will open for subscription of shareholders on Wednesday and close on June 3.
The Mukesh Ambani-led company had set a price of Rs 1,257 per share for the rights issue with a ratio of 1:15 on April 30. This means one RIL share will be offered for every 15 shares held at Rs 1,257 or a 14% discount to the closing price on April 30.
The rights issue is a part of the company’s strategy of deleveraging its balance sheet to become a zero net debt.
Cash-strapped companies use rights issues to raise money when they really need it. Companies grant shareholders the right in these rights offerings, but not the obligation, to buy new shares at a discount to the current trading price.
Here are the key things to know about the issue:
* Reliance is set to issue 42,26,26,894 equity shares of the face value of Rs 10 each.
* Shareholders will have to pay only 25% for subscribing to RIL’s mega Rs 53,125-crore rights issue and they will have to pay the balance in two instalments.
* A similar amount will be due for payment in May 2021 and the balance 50% has to be paid in November 2021.
* They will have to pay Rs 314.25 in May 2021 and balance Rs 628.50 is to be paid in November 2021.
* The last date for shareholders wishing to do an on market renunciation is May 29.
* Reliance Industries will use three-fourth of proceeds of its mega rights issue for repayment of some of its borrowings, according to offer document. It expects net proceeds of Rs 53,036.13 crore from the rights issue.
* Out of this, Rs 39,755.08 crore would go towards “repayment/ prepayment of all or a portion of certain borrowings availed by the company.” The remaining Rs 13,281.05 crore would be used for general corporate purposes.
* Out of the net proceeds of Rs 53,036.13 crore, three-fourth will be used to repay/repay either fully or partly the Rs 16,350 crore of commercial papers and Rs 36,213 crore of non-convertible debentures, the offer document said.
* Billionaire Mukesh Ambani’s firm had on April 30 announced fundraising of Rs 53,125 crore by way of a 1:15 rights issue.
* The last time RIL tapped the public for funds was in 1991 when it had issued convertible debentures. The debentures were subsequently converted into equity shares at Rs 55 apiece.
* Mukesh Ambani had unveiled plans to cut debt to zero by 2021 in August last year. As part of this plan, RIL has been seeking strategic partnerships across its businesses, while targeting to deleverage the balance sheet.
* At the end of March quarter, RIL had an outstanding debt of Rs 3,36,294 crore. It also had cash in hand of Rs 1,75,259 crore, bringing the net debt position to Rs 1,61,035 crore.
(With agency inputs)