Reliance Industries Rights Issue Gains 15% A Day After Stellar Debut

Reliance Industries-Rights Entitlement share price ended the day higher by Rs 30or 14.77per cent at Rs 232on the NSE.

Reliance Industries Rights Issue Gains 15% A Day After Stellar Debut

A rights issue grants shareholders the right, but not the obligation, to buy new shares.

Reliance Industries' rights issue, trading as Reliance Industries-Rights Entitlement or RIL-RE on the National Stock Exchange, gained 15 per cent, a day after making a blockbuster debut. On Wednesday, the RIL-RE stock had soared 39.6 per cent to end at the day's strongest level of Rs 212. The Reliance Industries rights issue shares slipped nearly 6 per cent in early trade, but soon recouped their losses and went on to touch an intra-day high of Rs 258. The Reliance Industries-Rights Entitlement (RIL-RE) will continue to trade on the NSE till May 29, allowing only delivery-based buying and selling.

Here are 10 things to know about Reliance Industries' rights issue, Reliance Industries-Rights Entitlement (RIL-RE):

  1. Reliance Industries-Rights Entitlement ended the day higher by Rs 30 or 14.77 per cent at Rs 232 on the NSE.

  2. On 30 April, the board of Reliance Industries had approved the country's biggest rights issue of up to Rs 53,125 crore at Rs 1,257 per share at a share ratio of 1:15 and fixed May 14 as the record date.

  3. One share would be offered for every 15 shares held, at Rs 1,257, amounting to a 14 per cent discount to the closing price on April 30.

  4. A rights issue grants shareholders the right, but not an obligation, to buy new shares in the rights offerings at a discount to the existing trading price.

  5. The rights issue is the first of its kind for Reliance Industries in almost 30 years. In 1991, the company had issued convertible debentures to raise funds from the public. The last time Reliance 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.

  6. Companies usually take the rights issue route to raise money. But for Reliance, it is not about raising funds as it has significant liquidity.

  7. The rights issue is a part of Reliance Industries' strategy of deleveraging its balance sheet to become a zero net debt. It is also an attempt to reward the shareholders and underscore promoters' faith in the Reliance growth story, say analysts.

  8. The promoter Ambani family has under-written the entire rights issue, pledging to buy shares that are unsubscribed.

  9. Reliance Industries chairman Mukesh Ambani had in August last year unveiled plans to cut debt to zero by 2021.

  10. As part of this plan, RIL has been seeking strategic partnerships across its businesses while targeting to deleverage the balance sheet.