Reliance mega rights issue over-subscribed 1.1 times

by Jun 1, 2020Business0 comments

Reliance Industries’ Rs 53,124 crore rights issue was surpassed on Monday 1.1 times, two days before the issue closed.

According to the subscription data issued on the stock exchanges, the total offers received for RIL rights shares was Rs 46.04 million, beating offers of Rs 42.26 million by 8.9 percent.


BSE has received requests for Rs 44.85 million, while NSE has received requests for Rs 0.57 million. The amount of the none-ASBA offer was 0.62 million shares of rupee rights (received at the Registrar through R-WAP).

The oversubscription figure indicates that shareholders requested many more shares than their rights.

The problem is still two days older and it is a well-observed phenomenon that in such insured allocation issues, institutional investors only invest in the last few days. This means that the final number of oversubscription will rise to an even higher level.

Billionaire Mukesh Ambani and the promoter group had pledged to subscribe to the full extent of their rights and any unsubscribed portion of the broadcast.

RIL has a large number of shareholders, more than 25.4 lakh of retail shareholders, more than 1,700 institutional investors, both domestic and foreign.

Significantly high subscription numbers show the high level of confidence each category of shareholders has in the company’s future and promoters’ commitment to creating value for them even in the days of COVID, the sources said.

The oversubscription numbers for RIL rights issues are better than other comparable issues in the recent past. The Bharti Airtel and Vodafone Idea rights issues were oversubscribed by 5-8 percent. Each of them had less than half of the RIL rights problem.

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Previously, RIL created a completely new trading instrument in the form of an ER that had a premium, liquidity, and interest valuation involving quality investors. ERs were never traded below intrinsic during the resignation period, which is a milestone in Indian capital markets.

The RIL-REs had created a value of approximately Rs 9.5 billion for the company’s shareholders, when the online trade ended on May 29.

The first RIL rights issue in three decades will close on June 3. In the rights issue, the company offers one share for every 15 shares of 1,257 rupees.

RIL on BSE closed at Rs 1520.45 on Monday. The company, according to the issue offer document, will use three-fourths of the proceeds from its mega-rights issue to repay some of its loans.

The company expects a net profit of Rs 53,036.13 crore from the rights issue after accounting for legal and other expenses.

Of these, Rs 39,755.08 crore would go towards “repayment/advance payment of all or part of certain loans guaranteed by the company,” he said. The remaining Rs 13,281.05 million would be used for general corporate purposes.

Shareholders will have to pay only 25 percent to subscribe to the company’s Rs 53,125 million rights issue, with the balance to be paid in two installments in May and November next year, the company said.

Of the price of 1,257 rupees per share, only 25 percent will be paid at the time of subscription. A similar amount will be paid in May 2021, and the balance of 50 percent is due in November 2021, the company said.

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“In the Request, investors must pay Rs 314.25 for participation in the capital of rights, which constitutes 25 percent of the issue price and the balance Rs 942.75 for participation in the rights, which constitutes 75 percent of the price of the issue, must be paid, in one or more subsequent calls ”, he said.

In May 2021, they will be required to pay Rs 314.25, and the balance of Rs 628.50 will be paid in November 2021.

The last time RIL turned to the public for funds was in 1991 when it issued convertible bonds. The bonds were subsequently converted into equity shares at Rs 55 each.

Ambani had submitted plans in August last year to reduce debt to zero by 2021. As part of this plan, RIL has been seeking strategic alliances in all of its businesses, while aiming to wipe out the balance.

At the end of the March quarter, RIL had outstanding debt of Rs 3.36.294 crore. He also had cash in the amount of Rs 1.75,259 crore, bringing the net debt position to Rs 1.61,035 crore.

As part of its balance sheet deleveraging plans, Reliance has sold a minority stake in its digital unit, Jio Platforms, to companies like Facebook and private equity companies.

It is also speaking with Saudi Aramco for selling a fifth of its oil business to chemicals for an order of USD 15 billion and has sold half of its fuel retail company to BP Plc for Rs 7,000 crore and business of Telecommunication towers to Brookfield for Rs 25.2 crore.

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Together, the proceeds from these transactions will result in a reduction of RIL’s net debt.

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