Mukesh Ambani-owned Reliance Industries on Saturday announced that its rights issue of Rs 53,125 crore, the biggest ever in India, will open on May 20 and close on June 3. The Letter of Offer will be filed with BSE, National Stock Exchange and Securities and Exchange Board of India and an abridged Letter of Offer, Application Form of Rights Issue, and Rights Entitlement Letter will be sent to the eligible equity shareholders of the company, the company informed in a filing to exchanges.
The RIL stock turned ex-date on May 13 and May 14 was fixed as its record date. The record date is the cut-off date at the end of which you must own RIL shares to be eligible to participate in the rights issue. The rights issue will be executed in a ratio of 1:15, that is, for every 15 shares, you'll get one RIL share. The company had fixed the issue price at Rs 1,257 per share, which is still 13.83 per cent lower than Friday's closing of Rs 1458.90. While the recent recovery in the RIL stock has already captured most of its near-term upside, most brokerages are still bullish on the stock.
Global brokerage HSBC has a target price of Rs 1,590 on the stock as it remains confident that growth projects and margin expansion will drive a 17 per cent earnings CAGR for FY20-22e. "We believe RIL's diversified businesses, asset monetisation and capital raising in the current environment make it financially stable. In addition, the expansion of RIL's omni-channel retail and digital businesses should allow it to grow rapidly," says HSBC in a report.
Brokerage Motilal Oswal has revised its target price on RIL stock to Rs 1,713 from Rs 1,618 earlier. The brokerage sees company's telecom venture Reliance Jio to garner premium valuations compared to competitors thanks to its lower debt and market leadership position.
Notably, in a span of three weeks, Jio Platforms received investments from three large marquee global investors-Facebook, Silver Lake and Vista. The stake sales will help deleverage RIL's balance sheet. The company expects to become net debt free by March 2021. "Jio Platforms has turned virtually debt free through the recent capital reorganisation, InvIT structure and now the stake sales. Overall, RIL has raised Rs 60,600 crore for 13.5 per cent equity stake through the three deals," says Motilal Oswal in a research note.
RIL is also in talks with Saudi sovereign wealth fund and General Atlantic to sell some stakes in Jio Platforms along with looking for an investor to buy into the Fiber business.
Although it's not mandatory for you to participate in the rights issue, you must know that post-issue the value of shares that you hold will get diluted due to new shares being issued. Besides, if you don't want to subscribe to the rights issue, you can sell your rights in the secondary market during the issue period. The application form will have all details.