RIL to consider rights issue, dividend

New Delhi: Billionaire Mukesh Ambani's Reliance Industries Ltd (RIL) will on Thursday consider a rights issue the first such issue in nearly three decades as it steps up efforts to pare debt. The board of the country's largest company will meet on April 30 to consider and approve audited financial results of the firm for the quarter and year ended March 31 as also to recommend dividend, RIL said.

It would also "consider a proposal to issue equity shares to existing shareholders on Rights basis, as may be permitted under applicable law, subject to such regulatory/statutory approvals, as may be required," the company said without giving details.

The move comes within days of RIL agreeing to sell 9.99 per cent stake in its digital platform to Facebook Inc for $ 5.7 billion or Rs 43,574 crore.

Ambani had in August last year unveiled plans to cut debt to zero by 2021. As part of this plan, RIL has been seeking strategic partnerships across its businesses while targeting to deleverage the balance sheet. At the end of December quarter, RIL had an outstanding debt of Rs 3, 06,851 crore. It also had cash in hand of Rs 1, 53,719 crore, bringing the net debt position to Rs 1, 53,132 crore. Analysts expect dilution of at least 5 per cent through the rights issue. In other words, each shareholder will be entitled to apply for five new shares for every 100 shares held.

This will help RIL raise about Rs 40,000 crore, assuming some discount to the current trading price. Typically, cash-strapped companies use rights issues to raise money when they really need it. In these rights offerings, companies grant shareholders the right, but not the obligation, to buy new shares at a discount to the current trading price. The last time RIL tapped the public for funds was in 1991 when it had issued convertible debentures.