Billionaire Mukesh Ambani's Reliance Industries Ltd (RIL) on Thursday announced fund raising of Rs 53,125 crore by way of a 1:15 rights issue, the first such issue in nearly three decades, as it steps up efforts to pare debt. One share will be offered for every 15 shares held at Rs 1,257, a 14 per cent discount to the closing price for April 30. In its earnings statement for fourth quarter, RIL said this would be India's biggest rights issue.
The move comes within days of RIL agreeing to sell a 9.99 per cent stake in its digital platform to Facebook Inc for USD 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 March quarter, RIL had an outstanding debt of Rs 3,36,294 crore. It also had cash in hand of Rs 1,75,259 crore, bringing the net debt position to Rs 1,61,035 crore.
RIL said its board also approved a dividend of Rs 6.50 per equity share for the financial year ended March 31, 2020.
It "approved the issuance of equity shares of Rs 10 each of the company of an issue size of Rs 53,125 crore by way of 'Rights Issue' to eligible equity shareholders of the company as on the record date."
"The price for the Rights Issue has been determined at Rs 1,257 per share and the share ratio at 1:15," it said. "The proposed Rights Issuance will be the first by RIL in three decades. The issue will be structured as partly paid shares and will enable shareholders to phase out the outlay on their investment over a period of time."
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. The debentures were subsequently converted into equity shares at Rs 55 apiece.
As part of its balance sheet deleveraging plans, RIL is talking to Saudi Aramco for selling a fifth of its oil-to-chemicals business for an asking of USD 15 billion and has sold half of its fuel retail venture to BP Plc for Rs 7,000 crore and telecommunication tower business to Brookfield for Rs 25,200 crore. Together, proceeds from these transactions will result in a reduction in RIL's net debt.
"The Board was also informed that the company expected to complete the capital raising programme totalling over Rs 1.04 lakh crore by Q1 of the current financial year. This includes the investment by Facebook in Jio Platforms, the upcoming rights issue, and the previous investment by British Petroleum in FY2019-20," RIL said.
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