Reliance Industries has announced that it would use three-fourths of the proceeds of its mega rights issue that is set to open on Wednesday (May 20) for the repayment of some of its borrowings. This is India’s biggest and the first such issue by the firm in nearly three decades.
From its biggest ever rights issue worth ₹53,125 crore, the company has expected net proceeds of ₹53,036.13 crore, out of which ₹39,755.08 crore would go towards repayment or prepayment of all or a portion of certain borrowings it had availed. The remaining ₹13,281.05 crore will be used for general corporate purposes, the company said.
Price of the rights issue
Reliance Industries will offer one share at ₹1,257 for every 15 shares held as on May 15. The shares of Reliance Industries closed at ₹1,408 on the BSE. While the shareholders will have to pay only 25 per cent for subscribing to the rights issue, the balance must be paid in two instalments in May and November next year.
Also, only 25 per cent of the share price of ₹1,257 must be paid at the time of the subscription. This amounts to ₹314.25 per rights equity share. The same amount will be due for payment in May 2021 and the balance 50 per cent of ₹628.50 has to be paid in November 2021, the company said.
Deadline for subscription
While the subscription for the mega rights issue is set to open on May 20, it will close on June 3. The last date for shareholders wishing to do an on market renunciation is May 29, the company has said.
The last time Reliance Industries had tapped the public for funds was in 1991 when it had issued convertible debentures. The debentures were subsequently converted into equity shares at ₹55 a share.
In August last year, Ambani 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.
RIL’s net debt
The company had a net debt of ₹1,61,035 crore at the end of the March quarter. While the outstanding debt stood at ₹3,36,294 crore, it has had cash of ₹1,75,259 crore in hand.
As part of its balance sheet deleveraging plans, Reliance has sold a minority stake in its digital unit, Jio Platforms to the likes of Facebook. The American social media company had announced that it would invest ₹43,574 crore for a 9.99 per cent stake in Jio Platforms.
Reliance is also talking to Saudi Aramco for selling a fifth of its oil-to-chemicals business for an asking of $15 billion and has sold half of its fuel retail venture to BP Plc for ₹7,000 crore and telecommunication tower business to Brookfield for ₹25,200 crore. Together, proceeds from these transactions will result in a reduction in RILs net debt.