Reliance to float rights issue on May 22

The rights issue of Reliance Industries Limited (RIL) is expected to open on May 22. It will be priced at Rs1,257 per share with a share ratio at 1:15. The issue amount is Rs53,125 crore. RIL has set May 14 as the ‘record date’ for the rights issue.

As per the payment terms, 25 per cent of the amount will be on application and the balance on more calls.

Market sources said there is a strong repositioning of RIL as consumer/technology company with Jio and retail platforms.

As new strategic investors participate in growth engines, the rights issue will reward existing shareholders by enabling them to participate in consumer/technology business value creation.

The rights issue ensures minority shareholders’ participate in next wave of value creation.

The price of “Right” shares to maintain the earnings per share (EPS) is Rs1,077. At 8 per cent discount on the market price of Rs1,427, the rights issue will be at Rs1,314 with a total size of Rs55,533 crore.

If the discount is 10 per cent, the price will be Rs1,284 at a total size of Rs54,265 crore. If the discount is 12 per cent, the rights issue price will be Rs1,257 with a total issue size of Rs53,124 crore.

Market sources said that RIL is well-positioned to navigate the macro headwinds and diversified earning streams but with conservative gearing. It has a robust and resilient business model, as 35 per cent of EBITDA is coming from consumer businesses.

In addition, the investment cycle has been completed and it has stronger cost positions across products and reduced Capex intensity. Sources point out that new business models create disproportionate value and the golden decade of value creation lies ahead.

They point out that asset light technology companies have created more value over the last decade than the aggregate market capital of energy companies in the S&P.

Indo-Asian News Service