Reliance Industries-Rights Entitlement (RIL-RE) made a blockbuster debut on the National Stock Exchange (NSE) on Wednesday, surging 39.6 per cent to settle at the day's high of Rs 212. It had opened the session at Rs 158.05 and touched an intra-day low of Rs 152. RE will be traded on the bourses till May 29 and only delivery-based buying and selling would be allowed.
The previous close of RIL-RE was Rs 151.90, i.e. the difference between the previous closing price of Reliance Industries at Rs 1,408.9 and rights issue price of Rs 1,257 per share.
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. 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.
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.
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 Industries 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.
Companies usually take the rights issue route to raise money. But for Reliance, it is not about raising funds as it has significant liquidity. 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. The promoter Ambani family has under-written the entire rights issue, pledging to buy shares that are unsubscribed.
Reliance Industries chairman Mukesh Ambani had in August last year unveiled plans to cut debt to zero by 2021. As part of this plan, RIL has been seeking strategic partnerships across its businesses while targeting to deleverage the balance sheet.