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Reliance Rights Issue: Key Points the Investors Should Know

Reliance Rights Issue: Key Points the Investors Should Know
by Nikita Bhoota 19/05/2020

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.



    Amount Involved

    Outstanding shares of Reliance Industries

    633.94 cr shares

    Ratio of Rights


    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 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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Top 5 Options Trading Strategies

Top 5 Options Trading Strategies

Options strategies combine different stock market positions with a view to managing risk or enhancing returns. Why are options unique? Unlike futures, options are asymmetric. For example, when one person buys futures and another sells futures, the risk of price fluctuation is equal for both. However, in an option the buyer has limited risk and unlimited return potential while the seller has unlimited risk potential and limited returns. This makes options strategies possible. Here are five popular options strategies.

Protective Put strategy

If you bought Reliance Industries at Rs.1485, how do you protect from a price fall. Create a protective put strategy by purchasing a put option of lower strike. So you can buy a 1480 strike put option at Rs.8. A put option is a right to sell and the premium is a sunk cost. If the price goes above Rs.1493 (1485 + 8), you profits are unlimited. On the downside, your maximum loss is cannot exceed Rs.13 {(1485-1480) + 8}. In short, you limit your loss by paying a small premium of Rs.8.

Covered Call strategy

A covered call strategy is normally used when you want to reduce the cost of holding a stock. If you bought SBI at Rs.340 for long term, but the stock falls to Rs.328; what do you do?. You are confident of the long term prospects of SBI, but in the next 3 months you don’t expect the stock to cross Rs.350. You can start by selling the near month 350 call at Rs.20 and repeat for 3 months. Here is how the returns table will look like.


First Month

Second Month

Third Month

SBI 350 call sold at




Position closed at




Net Profit / Loss




You have booked a net profit of Rs.26 on SBI calls in 3 months. At the end of 3 months, your effective cost of holding SBI has come down to Rs.314 (340 – 26). The only risk is if the stock falls sharply, you don’t have protection on the downside. That is where a butterfly comes in.

Butterfly strategy

Butterfly combines a protective put and covered call. Here, the premium received on the higher call sold, reduces the net cost of the put option purchased. This increases chances of profits. Butterfly is a multi-leg transaction, so watch out for transaction costs.

Bull call spread strategy

This option strategy is generally used when you are moderately bullish on a stock. You buy a call option of a lower strike and sell the call option of the same stock of a higher strike. For example, Tata Motors is currently quoting at Rs.153 and you expect the stock to touch Rs.170 at best in March 2020. You can create bull call spread by buying 150 March call option at Rs.12 and selling 170 call option at Rs.5. Your net cost of Rs.7 (12-5) will be the maximum loss on this strategy. Maximum profit on this strategy will be made at Rs.170. Beyond that, whatever you make on the 150 call, you lose on the 170 call. Hence, this strategy should only be used when you are moderately bullish.

Long strangle strategy

Normally, Infosys is very volatile on the day of the results but it has generally been hard to estimate the direction. Here, you can use volatile strategy like a Long Strangle. It entails buying a higher strike call and a lower strike put on the same stock. For example if you are expecting major volatility in Infy next month, you can create a Strangle by buying 820 March call at Rs.12 and also an 800 March put at Rs.16. Total cost of the Strangle and also maximum loss will  be Rs.28 (16+12). You will be profitable above 848 (820+28) or below 772 (800-28). This is a high cost strategy so you must only use it when you are confident of a large move either ways.

Go ahead and make the best of these options strategies. You can manage your risk and your returns better.

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Best Index Funds to Invest in 2020

Best Index Funds to Invest in 2020

Did you know that between 1979 and 2019, the Sensex moved from 100 to 42,000? In other words, your investment has compounded annually at 16.3% for 40 years. This is just the capital appreciation part. If you add the average dividend yield of 1.5%, the Sensex has compounded at 17.8% annually for the last 40 years. But, how do you invest in the Sensex?

That is where an index fund comes in handy

An index fund is a mutual fund that mirrors the portfolio of the index. Unlike an active fund, there is no stock selection. When you buy an index fund, just look at which index the fund is benchmarked to? The portfolio of the fund will mirror the stocks in the index in approximately the same proportion. You can buy and sell index funds from your existing mutual funds online platform. Index funds offer you a smart and efficient method of participating in the stock market without taking on too much of stock specific risk.

Best performing index funds for 2020

As a mutual fund investor, you have a wide choice of index funds. Every large fund house has an index fund of its own and there are funds pegged to different indices. How do you make a choice? The first rule is to stick to diversified indices like the Sensex or the Nifty. Secondly, since we do not know about future returns, we can use past returns on index funds to select the best fund to invest in. Here is the list of best index funds ranked on historical returns over last 5 years. We have only considered the growth option of Regular Plans of these index funds.

Fund Name

1-Year Returns

3-Year Returns

5-Year Returns

HDFC Index Sensex Fund (G)




ICICI Pru Nifty Next 50 Fund (G)




Tata Index Fund Sensex (G)




UTI Nifty Index Fund (G)




HDFC Index Nifty 50 (G)




Data Source: Morningstar | Returns calculated as on 20th Feb 2020

How to select the best index fund from the list?

There is a risk in taking a futuristic view based on past data but here are five basic rules you can follow to zero in on the best index fund.

  • Look for consistency of returns. If you are wondering why we are looking at 1-year returns for index funds (these are long term products), the idea is to check for consistency. The returns across various time frames should be consistent with the group. That makes the index fund more predictable.
  • Index funds do not have to spend on fund managers to find multi-baggers. Indexing is a passive approach and hence the lower cost gets passed on to you in the form of lower total expense ratio (TER). That helps to enhance returns. You can even opt for Direct Plans to reduce costs further.
  • One unique parameter you must consider in index funds is the tracking error. It measures the extent to which the index fund deviates from the index. Normally, an index fund should have low tracking error.
  • Given a choice, prefer the index fund with the larger AUM as small AUMs can come in the way of effectively replicating the index.
  • Take a long term view when you invest in an index fund. Markets tend to be cyclical and hence you must keep an investment horizon of at least 8-10 years for an index fund.

Index funds save you cost and the risk of stock selection. A bit of homework on your part can leave you with a satisfying and profitable journey investing in index funds.

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Yes Bank Sets Off Contagion Selling in the Stock Markets

Yes Bank Sets Off Contagion Selling in the Stock Markets

The news flows that came from Yes Bank on the morning of 05th March were drastically different from the news flows in late evening. In the morning, the Yes Bank stock rallied by over 25% after it was reported that SBI was expected to come in and support the bank with capital infusion. However, things took a turn when the RBI imposed a moratorium on Yes Bank at 8 pm on 05th March. Under the moratorium order, the Yes Bank board was superseded by an RBI appointed administrator and there were limits of Rs.50,000 withdrawal placed till April 03rd.

Why this move is impacting the stock markets?

Yes Bank is still a part of the Nifty 50 and also a player in the futures segment. The pressure is visible from the fact that as of 10.40 am there are more than 24 crore shares on offer but volumes have been just 1.30 crore shares as there are no buyers even at lower levels. Here is the impact.

  • UBS, a leading brokerage, has pegged the fair value of Yes Bank at around Rs.1, which effectively means it is worth nothing. That explains why there are no buyers in the counter despite the stock being nearly 45% down on 06th March.
  • Most people are worried about the impact that Yes Bank could cause to the markets considering the size of its balance sheet. As of March 2019, Yes Bank had total deposits of Rs.228,000 crore and now all that comes under moratorium. Yes Bank has borrowings of Rs.108,000 crore and that also creates a systemic risk.
  • The next problem could be at a brokerage level. Brokers and other investors who have borrowed against Yes Bank shares could face immediate margin calls. In addition, brokers have already been instructed to close out all outstanding positions in Yes Bank to avoid any market panic.
  • Then there is the collateral damage at two levels. Depositors may be forced to sell out other assets and shares to make up for the deposit locking of Yes Bank. This maybe evident in the next few days. Secondly, borrowers with loan sanctions fromYes Bank may have to look for alternative sources of finance.
  • The moratorium on Yes Bank raises some questions over other private banks that have been facing NPA problems in the past. For example IndusInd Bank, RBL Bank and Bandhan Bank have taken deep cuts in trading on 06th March. Other banks in the midst of a liquidity crunch like Lakshmi Vilas Bank are also on lower circuit.
  • Yes Bank was quite active in funding real estate projects and even NBFCs. Both these sectors will immediately feel the crunch as the funding sources dry up and that could also have a cascading effect. That is also evident in the stock prices.
  • Lastly, don’t forget the retail borrowing effect. As per the RBI announcement, any deposit made by an individual will only be paid after adjusting against the loans outstanding. This could create a major liquidity crunch among retail investors. In fact, the weak consumption that has been a major bugbear for the Indian economy could get worse if the situation is not handled quickly and effectively.

Yes Bank has already lost over 90% of its market value in the last one year and the sharp fall on 06th March only exacerbates the problem. The impact of Yes Bank on the Indian economy is likely to be much deeper than originally anticipated. A lot will depend on how quickly the administrator is able to put the house in order, infuse capital and bring stability back to the markets. The crisis is in the open; it is now about how it is handled!

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IPO performance in FY20

IPO performance in FY20
by Nikita Bhoota 05/06/2020

Financial Year 2020 was a mixed bag for investors who have invested in IPOs (initial public offerings). Only 14 IPOs entered the market in FY20. Of these 14 IPOs, 9 IPO’s have given positive returns while the remaining struggled to reach its issue price (except Rail Vikas Nigam). IRCTC tops the list of best IPO of the year with magnificent returns of 101%. The worst performing IPO of the year was SBI Card down 12.8% to the issue price on the listing date.

SBI Cards, Sterling and Wilson, Polycab India Metropolis Healthcare were the IPOs with an issue size of more than Rs 1000 crore. Spandana Sphoorty Financial, Ujjivan Small Finance Bank, Indian Railway Catering & Tourism Corpn (IRCTC) IPO Size was more than Rs. 500 crores. Whereas, Neogen Chemicals Ltd and Vishwaraj Sugar Industries Ltd had an IPO size of less than Rs 100 crore

Company Name

IPO Issue Size (Rs Crore)

SBI Cards and Payment Services Ltd.


Sterling and Wilson Solar Ltd.


Polycab India Ltd.


Metropolis Healthcare Ltd.


Spandana Sphoorty Financial Ltd.


Ujjivan Small Finance Bank Ltd.


Indian Railway Catering & Tourism Corpn. Ltd.


Rail Vikas Nigam Ltd.


Indiamart Intermesh Ltd.


CSB Bank Ltd.


Prince Pipes & Fittings Ltd.


Affle (India) Ltd.


Neogen Chemicals Ltd.


Vishwaraj Sugar Industries Ltd.


Source: Ace Equity

List of IPOs that either got a positive response from investors or were listed on the exchanges at a discounted price.

Company Name

IPO Issue price

IPO List price

Close as on 31st March 2020

Gain/ Loss on listing date

Indian Railway Catering & Tourism Corpn. Ltd. (IRCTC)





Ujjivan Small Finance Bank Ltd.





CSB Bank Ltd.





Affle (India) Ltd.





Indiamart Intermesh Ltd.





Polycab India Ltd.





Neogen Chemicals Ltd.





Metropolis Healthcare Ltd.





Vishwaraj Sugar Industries Ltd.





Rail Vikas Nigam Ltd.





Spandana Sphoorty Financial Ltd.





Prince Pipes & Fittings Ltd.





Sterling and Wilson Solar Ltd.





SBI Cards And Payment Services Ltd.





Source: Ace Equity

Going forward, FY21E is expected to be the toughest when it comes to raising money through IPOs. Global, as well as the Indian market is in downward trend due to the spread of Coronavirus epidemic. The shutdown of economic activity (lockdown) to curb the disease spread will affect the GDP numbers. The investors are preferring capital protection over risk. This will adversely affect the money inflow in the equity market. Therefore, only those companies that have very robust balance sheets will be preferred by investors.

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5 Well Known Stocks that Outperformed Benchmarks in FY20

Growth Stocks
by Nikita Bhoota 08/06/2020

From the general election to the slowing economy to coronavirus pandemic, FY20 witnessed it all. Share markets have been is under pressure since the coronavirus (COVID-19) pandemic broke in the country and all over the world. Domestic stock market benchmarks Sensex and Nifty slumped 24% and 26% respectively from 1st April 2019- 31st March 2020, posting their worst performance in over a decade. In 2008-09, the Sensex had declined 37.9%, while the Nifty50 cracked 36.2% on account of global financial crisis. Apart from these, factors such as massive corporate tax rate cuts, tussle between the RBI and the government, Union Budget, repo rate cuts, Ayodhya verdict, abrogation of Article 370, US-China trade deal were among the major triggers in FY20. However, even during this fall in markets, there are certain shares that not only outperformed the benchmark, but also gave investors stellar returns during the year. 5paisa have picked five such stocks that have outperformed the Nifty50 in the past financial year and have been strong despite tough economic conditions.

Company Name




Abbott India Ltd.




Gujarat Gas Ltd.




Berger Paints India Ltd.




Nestlé India Ltd.




Avenue Supermarts Ltd. (DMart)




Source: Ace Equity

Abbott India

Abbott India has given stellar returns, gained 113% in FY20.  This stock is not deterred by the current pandemic. The Pharma MNC stood strong despite the crash in markets. The company’s 9 out of top 10 brands are leaders in their respective participating markets and their rigorous restructuring measures have aided to achieve this market-beating performance. Over the years, the company has also operated with a net debt-free structure having more than sufficient cushion of cash.

Gujarat Gas

Gujarat Gas share price gained 58.1% in FY20. Gujarat Gas (GGL) is an amalgamation of Gujarat Gas Company and GSPC Gas. Gujarat Gas is India's largest city gas distribution player, with a total sales volume of 6.2mmscmd and presence across 24 districts in the states of Gujarat and Maharashtra and the Union Territory of Dadra Nagar Haveli. It has a network of a 15,000 km-long gas pipeline and 291 CNG stations, constituting 25% of all CNG stations in the country.

Berger Paints

The stock gave magnificent return of 50.9% in FY20. It has not only managed to outperform Nifty 50 but also the country’s largest paint company Asian Paints. Berger has presence in the decorative paints and industrial coatings segments in domestic and international markets. Further, it has a presence in external insulation finishing systems. In the industrial coatings segment, Berger caters for the protective coatings, automotive (primarily two-wheeler and three-wheeler, and commercial vehicles) and general industrial segments. In the international segment, Berger has a presence in the decorative paints segment in Nepal and has presence in the external insulation system in Poland (where it is the second largest player, with 11-12% market share through Bolix SA, which it acquired in 2008 for US$39m. It has the second-largest distribution network, with more than 23,000 dealers.

Nestlé India Ltd

Nestlé India, the Maggi maker, has also gained over 49.6% in FY20. The company primarily operates in four segments, viz. Milk Foods & Nutrition, Chocolates & Confectionery, Prepared Dishes & Beverages.

Nestlé India has strong brands like Cerelac, Lactogen Nestlé Dahi and Slim milk (Milk food and nutrition), Maggi (Prepared dishes), KitKat (Chocolates) and Nescafé (Beverages) under its fold. Company has seen strong growth in its Maggi and chocolate brands during the CY19.

Avenue Supermart (DMart)

Avenue Supermarts (DMart) shares were up 47.3% in FY 20. DMart is an emerging supermarket chain, with major presence is in the states of Maharashtra, Gujarat, Telangana and Karnataka. DMart operates most of its stores in densely located areas and focuses on customers in the lower and middle class segments of society. DMart provides lower prices for its products across various categories and sub-categories, which is appealing to the price-sensitive customers. In order to minimise operational costs, the company follows an ownership model (including long-term lease contracts, where lease period is over 30 years), rather than a rental model.