Reliance Industries' shares swung between gains and losses on Tuesday, a day after the oil-to-telecom conglomerate said it will consider a rights issue - its first in almost 30 years - this week. In a filing late on Monday, the company said its board will consider the rights issue at its meeting on Thursday, April 30. Analysts say the move appears to be another attempt to bring down its debt. The company did not specify any reasons behind the plan, which is subject to regulatory approvals.
After a positive start on Tuesday, the Reliance Industries shares changed direction at least twice, trading between Rs 1,391.95 and Rs 1,454.75 on the BSE compared to its previous close of Rs 1,430.30.
At 1:27 pm, RIL shares traded up 0.54 per cent at Rs 1,438.05 apiece on the bourse, underperforming the benchmark S&P BSE Sensex index which was up 0.91 per cent amid choppy trade.
"Reliance's rights issue is a surprise, considering that they are getting equity infusion from Facebook," news agency Reuters quoted Naveen Kulkarni, chief investment officer at Axis Securities, as saying in a report.
"There will be some dilution because of the issue, but it is difficult to gauge at this point in time how much the stock will fall because the quantum is not known," he added.
Other analysts however said that in the long term, the company, by reducing its debt, will inspire more confidence in stakeholders.
"It reflects promoter's unflinching faith in the medium to long term prospects of various businesses,"Ajay Bodke, chief executive at Prabhudas Lilladher, told Reuters.
Last year, Reliance Industries chairman Mukesh Ambani - Asia's richest man - unveiled plans to make his group free of net debt by early 2021.
The company will also consider its earnings for the quarter ended March 31 and a dividend on April 30.