Article

Reliance Rights Issue: Key Points the Investors Should Know

20 May 2020 Nikita Bhoota

With Reliance being all set to open its mega right issue despite the covid-19 pandemic, investors all geared up to make maximum out of the opportunity impressed by its ability to withstand crises. But as the media is all flooded with the reports, here we are to help you with exactly what you need.

To know about the application process in detail, click here.

And for the other key points, here is our blog covering all you need.

Oil-to-telecom giant Reliance Industries (RIL) has come up with the biggest rights issue amounting to Rs 53,125 crore in nearly 30 decades. The main purpose of the issue is to cut the debt and to be a zero debt company by March 2021. Additionally, the company’s Jio platform recently raised Rs 60,596 crore from leading technology investors – Facebook (Rs 43,574 crore) Silver Lake (Rs 5,656 crore) and Vista Equity Partners (Rs 11,367 crore) to support Reliance zero debt company plan. Rs 7,000 crore cash flow expected from the deal with BP (fuel retailing) and stake buy plans of Saudi Aramco in its O2C business will also help to eliminate debt. As on 31st March 2020, the net debt of the company stood at Rs 1,61,035 crore on a consolidated basis.

What is Rights Issue?

When a company needs money for expansion, acquiring assets or want to repay the debt of the company, they have different options to raise money like coming up with an initial public offer (IPO), Follow-on public offer (FPO) or rights issue. However, the IPO option is only possible when the companies are yet to be listed on the stock exchanges and are offering shares to the public for the first time. Whereas, FPO means an already-listed companies comes out with a fresh tranche of shares.

While in case of a rights issue, a company may come out with a fresh batch of shares, but exclusively for the existing shareholders. Simply, it means that only shareholders on a given date, known as “record date", will have the right to buy these shares. Record date means the date at which an investor of the company should own shares of the company to be eligible to participate in the rights issue. The record date helps the issuer of the rights issue to determine the number of shareholders eligible to apply for specified securities in the proposed rights issue.

Details of Reliance Rights Issue

  • The issue price of RIL rights issue is Rs 1,257 per share i.e. ~14% discount to the closing price on April 30, 2020
  • The rights issue will open for subscription on May 20, 2020 and the closing date is June 3, 2020
  • The table below will summarize the rights ratio and the entitlement of a shareholder.

    Particulars

    Amount Involved

    Outstanding shares of Reliance Industries

    633.94 cr shares

    Ratio of Rights

    1:15

    Number of rights shares issued

    42.26 cr shares

    Price of the Rights

    Rs.1,257 per share

    Size of the Rights issue

    Rs. 53,125 cr

    Source: Media Articles

    The company has fixed 14th May as the record date. Every shareholder whose name appears in the register as on record date will be entitled to shares in the ratio of 1 share for every 15 shares held.

Will the Rights Equity Shares trade along with the currently listed Equity Shares of the Company?

Rights Equity Shares are partly paid up shares and will be allocated a separate ISIN. Hence, it will not trade with the currently listed Equity Shares of the Company. It will trade separately. Once the entire Call Money is raised and the Rights Equity Shares are fully-paid up, the Rights Equity Shares will trade along with the currently listed Equity Shares of the Company.

On payment of the final Call in respect of the partly paid-up Rights Equity Shares, such partly paid-up Rights Equity Shares would be converted into fully paid-up Equity Shares and shall be listed and identified under the existing ISIN for fully paid-up Equity Shares of the Company.

Market Reaction

As per the experts, market has reacted positively to the news. Most experts are expecting the company shares to continue performing in the market. According to them, since all promoters have pledged to execute their rights to the rights issue, it shows the confidence the promoters have on the company.

Should Investor Subscribe to the Rights Issue?

An investor should be able to look beyond the discount offered. The rights issue is different from the bonus issue as one is paying to get additional shares of the company. Hence, one should subscribe to it only if the investor is completely sure of the company’s long-term performance.

How to Apply for the Rights Issue?

If the shares are in Demat form then, the investor can follow the below procedure

  1. ASBA (Applications Supported by Blocked Amount)

    Investor can submit the application form in physical mode at bank branches or through net banking (most of the banks such as Axis, HDFC, ICICI, SBI, Kotak) have enabled application through net banking platform just like IPO application.

  2. R-WAP

    Registrar web based application platform at https://rights.kfintech.com can submit the online application form and make online payment using internet banking or UPI facility.

  3. Physical Shares

If shares are in physical form then, investors can only apply through R-WAP.

Kindly note: All shares allotted in the rights issue will be only in Demat form. For further details on the application process you may visit our forum.

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Reliance Rights Issue: Key Points the Investors Should Know

20 May 2020 Nikita Bhoota

With Reliance being all set to open its mega right issue despite the covid-19 pandemic, investors all geared up to make maximum out of the opportunity impressed by its ability to withstand crises. But as the media is all flooded with the reports, here we are to help you with exactly what you need.

To know about the application process in detail, click here.

And for the other key points, here is our blog covering all you need.

Oil-to-telecom giant Reliance Industries (RIL) has come up with the biggest rights issue amounting to Rs 53,125 crore in nearly 30 decades. The main purpose of the issue is to cut the debt and to be a zero debt company by March 2021. Additionally, the company’s Jio platform recently raised Rs 60,596 crore from leading technology investors – Facebook (Rs 43,574 crore) Silver Lake (Rs 5,656 crore) and Vista Equity Partners (Rs 11,367 crore) to support Reliance zero debt company plan. Rs 7,000 crore cash flow expected from the deal with BP (fuel retailing) and stake buy plans of Saudi Aramco in its O2C business will also help to eliminate debt. As on 31st March 2020, the net debt of the company stood at Rs 1,61,035 crore on a consolidated basis.

What is Rights Issue?

When a company needs money for expansion, acquiring assets or want to repay the debt of the company, they have different options to raise money like coming up with an initial public offer (IPO), Follow-on public offer (FPO) or rights issue. However, the IPO option is only possible when the companies are yet to be listed on the stock exchanges and are offering shares to the public for the first time. Whereas, FPO means an already-listed companies comes out with a fresh tranche of shares.

While in case of a rights issue, a company may come out with a fresh batch of shares, but exclusively for the existing shareholders. Simply, it means that only shareholders on a given date, known as “record date", will have the right to buy these shares. Record date means the date at which an investor of the company should own shares of the company to be eligible to participate in the rights issue. The record date helps the issuer of the rights issue to determine the number of shareholders eligible to apply for specified securities in the proposed rights issue.

Details of Reliance Rights Issue

  • The issue price of RIL rights issue is Rs 1,257 per share i.e. ~14% discount to the closing price on April 30, 2020
  • The rights issue will open for subscription on May 20, 2020 and the closing date is June 3, 2020
  • The table below will summarize the rights ratio and the entitlement of a shareholder.

    Particulars

    Amount Involved

    Outstanding shares of Reliance Industries

    633.94 cr shares

    Ratio of Rights

    1:15

    Number of rights shares issued

    42.26 cr shares

    Price of the Rights

    Rs.1,257 per share

    Size of the Rights issue

    Rs. 53,125 cr

    Source: Media Articles

    The company has fixed 14th May as the record date. Every shareholder whose name appears in the register as on record date will be entitled to shares in the ratio of 1 share for every 15 shares held.

Will the Rights Equity Shares trade along with the currently listed Equity Shares of the Company?

Rights Equity Shares are partly paid up shares and will be allocated a separate ISIN. Hence, it will not trade with the currently listed Equity Shares of the Company. It will trade separately. Once the entire Call Money is raised and the Rights Equity Shares are fully-paid up, the Rights Equity Shares will trade along with the currently listed Equity Shares of the Company.

On payment of the final Call in respect of the partly paid-up Rights Equity Shares, such partly paid-up Rights Equity Shares would be converted into fully paid-up Equity Shares and shall be listed and identified under the existing ISIN for fully paid-up Equity Shares of the Company.

Market Reaction

As per the experts, market has reacted positively to the news. Most experts are expecting the company shares to continue performing in the market. According to them, since all promoters have pledged to execute their rights to the rights issue, it shows the confidence the promoters have on the company.

Should Investor Subscribe to the Rights Issue?

An investor should be able to look beyond the discount offered. The rights issue is different from the bonus issue as one is paying to get additional shares of the company. Hence, one should subscribe to it only if the investor is completely sure of the company’s long-term performance.

How to Apply for the Rights Issue?

If the shares are in Demat form then, the investor can follow the below procedure

  1. ASBA (Applications Supported by Blocked Amount)

    Investor can submit the application form in physical mode at bank branches or through net banking (most of the banks such as Axis, HDFC, ICICI, SBI, Kotak) have enabled application through net banking platform just like IPO application.

  2. R-WAP

    Registrar web based application platform at https://rights.kfintech.com can submit the online application form and make online payment using internet banking or UPI facility.

  3. Physical Shares

If shares are in physical form then, investors can only apply through R-WAP.

Kindly note: All shares allotted in the rights issue will be only in Demat form. For further details on the application process you may visit our forum.