RIL Rights Issue
Core competency of a business enterprise depends on its capability to withstand general market-fluctuations in a stable manner. For businesses having a significant number of shareholders, there are several ways in which funds can be raised for the purpose of expanding the business or clearing their debts. Rights issue is one such channel through which a listed company can raise funds from their existing shareholders. Funds are raised by offering a share-purchase channel to the existing shareholders at lower and discounted rates. What this means is that existing shareholders get to buy new and additional shares at discounted prices, in addition to the shares which they already have.
Reliance Industries Limited Rights Issue
On 30th April, 2020, the board meeting of Reliance Industries Limited (RIL) commenced and the highlight was the rights issue that was made open to shareholders on 20th May, 2020 with 14th May being made the record date for deciding the eligibility of the shareholders for subscribing to shares under rights issue. The rights issue was valued at Rs.53,125 Crore with each share of RIL being valued for purchase at Rs.1257. The board meeting also took the decision of keeping the share ratio at 1:15, which means that any shareholder having 15 shares can purchase 1 share of equity at the specified price of Rs.1257 per share. The closing date of rights issue was decided as 3rd June 2020 and date of allotment as 10th June, 2020. The purchased shares under these offers will be listed on 12th June 2020.
The Board of Directors of RIL has, in the recent past, declared the intent of being completely “debt-free” by 2021, which means that the current rights issue serves as an important instrument for achieving this target. Besides enabling the company to significantly increase its internal potential funding, rights issue also serves as a mutually beneficial investment channel for the existing shareholders.
The share ratio for the rights issue is listed at 1: 15; thereby allowing any person to invest in the equity shares, while retaining the original investment in a pre-decided manner. This ratio essentially means that a person having, for instance 75 shares of RIL can purchase 5 shares through rights issue. In the RIL rights issue, an existing shareholder can choose to purchase additional shares or can sell the rights to any other shareholder or potential investor, as per his/her own preference. So, rights issue allows investment together with flexibility of choice.
It is important to keep track of the dates related to rights issue. The record date of purchase was announced as 14th May, which means that the shareholders who purchase RIL shares before this date will be eligible for rights issue. As decided by the RIL board of directors, the detailed subscription form for eligible shareholders will be sent via e-mail (on the e-mail address that is linked to the existing Demat account). Moreover, keeping in mind the hassles being faced by consumers/shareholders owing to the on-going lockdown, SEBI (Securities and Exchange Board of India) has validated the online process of payment and form submission, as and when required.
Credit of the rights entitlement will be done to the Demat accounts of existing shareholders and they have the option of purchasing or selling these shares before the closing date i.e. 3rd June, 2020. The amount payable for individual shares through rights issue is Rs.314.25, which can be broken down into constituent face value of Rs2.50 and the premium value. The balance amount (Rs. 942.75) is payable later on, as will be communicated by the board to the shareholders.
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