Reliance rights issue world’s biggest by a non-financial issuer in ten years

Reliance Industries Ltd’s rights issue opened for the subscription of shareholders on May 20 and will close on June 3

Updated - June 02, 2020 04:12 pm IST

Published - June 02, 2020 04:04 pm IST - New Delhi

Photo for representation.

Photo for representation.

Reliance Industries’ ₹53,124 crore rights issue is the largest in the world by a non-financial issuer in the last 10 years, an analyst said.

Oil-to-telecom conglomerate Reliance Industries Ltd’s rights issue opened for the subscription of shareholders on May 20 and will close on Wednesday.

Also read:RIL plans rights issue to be debt-free

According to data from Dealogic, the issue is the biggest in the world by a non-financial issuer in the last 10 years.

The only other non-financial issuer close to the issue size is $7.002 billion issue by Bayer AG in June 2018.

Billionaire Mukesh Ambani’s firm had on April 30 announced fund raising of ₹53,125 crore by way of a 1:15 rights issue — India’s biggest and the first such issue by the firm in nearly three decades.

One share will be offered for every 15 shares held at ₹1,257, a 14% discount to the closing price for April 30.

The issue had been over-subscribed 1.1 times as of Monday, according to stock exchange data.

The biggest rights issue since the global financial crisis of 2008 is the $19.57 billion issue by HSBC Holdings Plc in April 2009, according to Dealogic. Deutsche Bank’s $13.96 billion issue in October 2010 is the second biggest closely followed by $13.69 billion issue by UniCredit.

From Asia, the biggest offering was by Bank of China in December 2010 with an issue size of $8.96 billion.

The rights issuance is the first by Reliance in three decades.

The last time Reliance tapped the public for funds was in 1991 when it had issued convertible debentures. The debentures were subsequently converted into equity shares at ₹55 apiece.

Mr. 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 March quarter, RIL had an outstanding debt of ₹3,36,294 crore. It also had cash in hand of ₹1,75,259 crore, bringing the net debt position to ₹1,61,035 crore.

As part of its balance sheet deleveraging plans, Reliance has sold a minority stake in its digital unit Jio Platforms to Facebook and top private equity funds.

It 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 RIL’s net debt.

Last month, Moody’s Investors Service had stated that the rights issue is credit positive as earnings will decline because of economic shutdowns.

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