What makes RIL's right issue attractive?

Billionaire Mukesh Ambani-owned Reliance Industries' mega rights issue of Rs 53,125 crore opened on Wednesday, May 20, 2020, for the subscription for existing shareholders. This rights issue is India's largest-ever equity offering and RIL's first rights issue in nearly three decades. It has been priced at Rs 1,257 apiece and will close on June 3, 2020.

The ex-date of rights issue was May 13, 2020, and implies on the investors who brought its shares before May 13, 2020, and held those shares in their account before May 14, 2020, are eligible to apply for the rights issue. The company is offering 1 share for every 15 held as of record date, which was May 14, 2020.

For this particular issue, existing shareholders are required to pay only 25 per cent of the money for subscribing to the rights issue, while the balance will fall due in two instalments in May and November 2021.

What makes RIL's Right Issue attractive?

The oil to telecom major recent steps to deleverage its balance sheet and create value in retail and telecom ventures look to be attractive and existing shareholders can avail the window as it has the potential to rise.

Flexibility in payments makes it easier for an investor to buy the stock. In the process, an investor can pay 25 per cent or one-fourth of the due amount and invest in the stock, which is the best performing stock at present. However, the buyer will have a liability to pay another Rs 1,096 after one and a half year.

Where the raised funds will be used?

Rs 39,755.08 crore of the total fund that is raised will be used in repayment or prepayment of a portion of certain borrowings of the company.

Global brokerage HSBC in a report published last week said, "We believe RIL's diversified businesses, asset monetisation and capital raising in the current environment make it financially stable. Besides, the expansion of RIL's omnichannel retail and digital businesses should allow it to grow rapidly."

The allotted shares will now trade separately and will they will trade along with the currently listed equity shares of the company only after the entire call money is raised and the rights issue shares are fully paid-up.

Recent happenings at Reliance Industries

Deal with General Atlantic: Jio, the digital arm of Reliance Industries, in the recent past has received a cheque worth Rs 6,598 crore from General Atlantic, a leading global equity firm, for a 1.34 per cent stake.

Deal with Facebook: The company has also announced a $5.7 billion deal with Facebook for a 9.99 per cent stake in Jio platforms. It was India's largest-ever FDI in the technology sector.