Reliance plans mega rights issue of Rs53,215 cr
01 May 2020
Reliance Industries Ltd (RIL) plans to raise Rs53,215 crore through a rights issue, the biggest equity issue so far in the Indian capital market. A meeting of RIL’s board of directors on Thursday approved issuance of equity shares of Rs10 each of the company of an issue size of Rs53,125 crore by way of ‘rights Issue’ to eligible equity shareholders of the company as on the record date.
The terms and conditions of rights Issue will be decided by the board or a duly constituted committee of the board and will be subject to applicable laws and regulatory/statutory approvals as may be required.
The price for the rights issue has been determined at Rs1,257 per share, a discount of just over 14 per cent on Thursday's closing price of Rs1,467.05 per share.
Under the proposed rights issue, every shareholder will get a rights entity entitlement to subscribe to one equity share for every 15 shares of RIL they hold.
At 50 per cent shareholding, Ambani will have to bring in at least Rs26,600 crore to fund his subscription for the rights issue.
The promoter and promoter group of the company have confirmed they will subscribe to the full extent of their aggregate rights entitlement. In addition, they will also subscribe to all the unsubscribed shares in the Issue.
"The proposed Rights Issuance will be the first by RIL in three decades. The issue will be structured as partly paid shares and will enable shareholders to phase out the outlay on their investment over a period of time," the company said in a statement
S&P and Moody’s have both reaffirmed Reliance’s investment grade ratings. Transformative strategic investments in consumer facing business have firmly re-positioned Reliance as India’s preeminent consumer/technology company. Jio and Retail platforms underpin Reliance’s participation in the next leg of value creation in India. As new strategic investors look to partner and add value to these growth engines, the rights issue enables all shareholder to participate in growth of consumer/technology business.
The promoters have confirmed that in addition to subscribing to their aggregate entitlement in full, they will also subscribe to all the unsubscribed portion. This demonstrates their deep conviction in Reliance’s future prospects and outlook.
The board also approved a scheme of arrangement for transfer of O2C Undertaking (as defined in the scheme) of the company to Reliance O2C Limited as a going concern on slump sale basis for a lump sum consideration equal to the income tax net worth of the O2C Undertaking as on the appointed date of the scheme. O2C undertaking of the company comprises of entire oil-to-chemicals business of the company consisting of refining, petrochemicals, fuel retail and aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities. The scheme is subject to necessary statutory / regulatory approvals under applicable laws, including approval of National Company Law Tribunal.
The board was also informed that the company expected to complete the capital raising programme totalling over Rs1,04,00 crore by Q1 of the current financial year. This includes the investment by Facebook in Jio Platforms, the upcoming rights issue and the previous investment by British Petroleum in FY2019-20.
In addition to the FB investment, the board was informed that RIL has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months. This establishes the attractiveness of Jio Platforms to the world and is a strong validation of RIL’s capability to conceive large-scale disruptive Greenfield businesses. With a strong visibility to these equity infusions, the board was informed that RIL is set to achieve net zero debt status ahead of its own aggressive timeline.
In spite of the Covid-19 crisis and the lockdowns, the due-diligence by Saudi Aramco for the planned investment in the O2C business is on track as both the parties are committed and actively engaged, RIL said.