The largest rights issue in India has opened for shareholders of Reliance Industries Limited on 20 May. The RIL Rights Issues aims to raise up to Rs 53,036.13 crore of which Rs 39,755.08 crore would be used for paring debt as part of the company's deleveraging plan to become a zero net debt firm by March 2021.
Deven Choksey of KRChoksey Investment Managers Private Limited has recommended a 'subscribe' rating to the rights issue.
"In our calculations, Jio platform will be listed on NASDAQ in next 18-24 months, at more than 50 percent higher valuations than valued at current levels. There is also a possibility of Microsoft buying stake in JV company managing cloud services under Jio Platform," Choksey said according to a CNBC-TV18 report.
Details on the RIL Rights Issue
- The subscription for rights issue will open on 20 May and closes on 3 June 2020.
- RIL has already sent e-mails to shareholders eligible for the rights issue which includes the abridged letter of offer, application form of a rights issue and rights entitlement letter.
- 42,26,26,894 equity shares of the face value of Rs 10 each will be issued at a price of Rs 1,257 per rights equity share. This means it is being issued at a premium of Rs 1,247 per share.
- The Rs 1,257 per share price is a 14 percent discount to the closing price of the stock as on 30 April, the date on which the rights issue was announced.
- One share will be offered to eligible shareholders for every 15 shares held in the company as on 14 May.
- Shareholders participating in the issue need to only pay 25 percent of the total amount at the time of subscription: Rs 314.25 per rights equity share (face value Rs 2.50 + premium Rs 311.75). The balance amount of Rs 942.75 per rights equity share is to be paid later that is: Rs 314.25 per share or 25 percent in May 2021 and Rs 628.50 or the balance 50 percent in November 2021.
- Promoter and promoter group (which includes the Ambani family members) with 50.07 percent stake have pledged to buy the full extent of their entitlement and also subscribe to unsubscribed shares in the rights issue.
What is a Rights Issue?
It is an invitation by the company to its existing shareholders to purchase additional new shares in the company at a discounted rate. It is an opportunity for shareholders to increase their exposure to the stock. It is a way for the company to raise funds for its workings like a new project, reduce debt, or restructure its equity capital base while rewarding existing shareholders for staying invested in the firm.
RIL has announced that the rights issue is to lower its debt dependence.
How to Apply for RIL Rights Issue?
You will be able to apply for the rights issue if you were holding shares of RIL as on record date: 14 May. The process of applying for IPO is similar to an IPO issue.
What you need beforehand:
- DP ID & Client ID
- Bank account details/net banking details/UPI ID details
Method 1 (on RTA's website)
SEBI has allowed the process to be modified amid lockdown to enable easy application to the issue online.
Note that the following steps are for individual retail investors who are residents in India and are holding & making payments through their own resident bank accounts only.
- Visit the RTA's website for the RIL Rights Issue: https://rights.kfintech.com/
- Select the "Go" option under the "R-WAP Apply for Rights Issue" tab.
- Read through the terms and conditions of the issue.
- Select "I have read, understood, accept and undertake all conditions mentioned in the Application Form" and all the declarations. Then click on "Proceed."
- In the next page, confirm details on your shareholding pattern and provide details on DP ID & Client ID and PAN.
- Enter other details. Note: if your DP starts with IN, your depository is NSDL and its CDSL if the DP ID is completely numeric.
- You will then be able to pay 25 percent of the subscription price using net banking or UPI.
Note that no other payment is allowed under this method and there is a transaction limit of Rs 2 lakh on UPI. Rs 314.25 for every share applied will be deducted.
Balance Refund amount if any, will be refunded back to your bank later by the company in case you are allotted lesser than shares applied for.
Method 2 (net banking)
This is similar to an IPO application.
- Log in to your own bank's net banking and find the option to invest in IPO/Rights.
- You should be able to find the Reliance Rights Issue among the options open for application. Click apply.
- Fill basic details of your folio, number of rights shares you want to apply, etc.
- In this case, your bank will enable ASBA option wherein, no amount will be debited from the bank, however, the bank will block the amount for every share applied (Rs 314.25 per share in case of RIL Rights Issue) and release only the amount for shares allotted (if and when you are allotted) to the registrar.
- The rest or all of the amount (not subscribed) will be released back into your bank account.