Asia’s richest man Mukesh Ambani’s Reliance Industries Ltd (RIL), which is on a fund-raising spree amid the covid-19 pandemic, is set to open its massive ₹53,125-crore rights issue on Wednesday.
The rights issue, which closes for subscription on 3 June, will be the largest share sale India has seen—more than double the 2019 record held by Bharti Airtel Ltd and Vodafone Idea Ltd of around ₹25,000 crore each. Reliance has hired a syndicate, comprising 14 investment banks, including Morgan Stanley, Citi, Bank of America and Axis Capital, to manage it.
Ahead of the rights issue, Reliance sold a 14% stake in Jio Platforms to multiple investors, including Facebook Inc., across deals worth ₹67,194.75 crore. The initiatives are aimed at helping RIL reach its ambitious goal of becoming a zero net-debt company by March 2021. RIL’s net debt stood at ₹1.53 trillion on 31 December.
The company has set a price of ₹1,257 per share for subscribing to the rights offering. Investors keen on subscribing to the share sale can make the payments in three instalments—25% of the amount at the time of subscription, another 25% in May 2021 and the remaining 50% in November 2021.
Analysts tracking RIL said its power to beat disruptions and its own value-unlocking abilities amid the pandemic make its rights issue attractive for retail investors.
“The pricing of the rights issue at ₹1,257 per share is a very confident pricing as the promoters will be subscribing to almost half of the issue and raise ₹26,000 crore for the company. While the promoters and institution holders are long-term holders and will subscribe to the issue as the company’s prospects appear brighter than ever, this is also a critical stage for individual investors,” said Axis Securities.
The brokerage added that as RIL’s business-to-consumer (B2C) businesses offer high growth potential, the discounted price of the rights issue provides a good opportunity to participate in high growth businesses.
On Tuesday, RIL’s shares closed at ₹1,408.15 apiece on the BSE.
The biggest rights issue in India will also be a litmus test for stock markets, which have been grappling with liquidity concerns. After a 32% rally in April, the stock has weakened this month. Currently, Reliance has 25 buy ratings, three hold and sell ratings by analysts on Bloomberg.
“If an investor one is looking at maintaining or increasing his equity exposure, then this issue can be subscribed. At the current juncture, there are very few companies that show the strength to withstand disruptions and have value unlocking triggers. Also the facility of making part payments is beneficial for shareholders in terms of parting liquidity,” said Deepak Jasani, research head, HDFC Securities.