Billionaire Mukesh Ambani’s Reliance Industries Ltd (RIL) on Thursday announced fund raising of Rs 53,125 crore by way of a 1:15 rights offering , the primary such issue in nearly three decades, as it steps up efforts to cut debt.
“The board approved the issuance of equity shares of Rs 10 each of the corporate on rights basis to eligible equity shareholders as on the record date of a problem size of Rs 53,125 crore,” said RIL during a notification. This will be the biggest ever right issue by any Indian company in nearly three decades.
One share will be offered for every 15 shares held at Rs 1,257, a 14 percent discount to the closing price for 30 April. The Right Issue Math goes like this:
For every 15 shares costing 1466 per share (closing price of 30 April) which concludes to a total of Rs. 21990 , shareholders will get 1 share costing Rs. 1257.
Shareholders can subscribe one equity share for each 15 equity shares held by eligible shareholders as on the record date. The move comes within days of RIL agreeing to sell a 9.99 percent stake in its digital platform to Facebook Inc for USD 5.7 billion or Rs 43,574 crore.
Ambani in August last year had revealed plans to cut debt to zero by 2021. As a part of this plan, RIL has been seeking strategic partnerships across its businesses while targeting to deleverage the record .
Almost all cash-strapped companies use rights issues to raise money when they really need it. In these rights offerings, companies grant shareholders the proper , but not the requirement , to shop for new shares at a reduction to the present trading price. This fund-raising is important to reduce the debt in the company and after this issue it would fall off to Rs. 64301 crores. As a plan made by Mukesh Ambani it seems significant for the company to be net debt free by the end of financial year.
RIL said its board also approved a dividend of Rs 6.50 per equity share for the fiscal year ended March 31, 2020. “The Board was also informed that the corporate expected to finish the capital raising program totaling over Rs 1.04 lakh crore by Q1 of the present fiscal year . This includes the investment by Facebook in Jio Platforms, the upcoming rights offering , and therefore the previous investment by British Petroleum in FY2019-20,” RIL said.