Reliance Industries’ mega Rs 53,124 crore rights issue was on Monday oversubscribed 1.1 times, two days ahead of the issue closing.
According to issue subscription data on stock exchanges, total bids received for RIL’s rights shares stood at 46.04 crore, overshooting the 42.26 crore shares on offer by 8.9 per cent.
BSE has received applications for 44.85 crore rights shares, while NSE got applications for 0.57 crore. The non-ASBA bid quantity stood at 0.62 crore rights shares (received at Registrar through R-WAP).
The oversubscription figure indicates that shareholders applied for many more shares than their entitlements.
The issue still has two more days to go and it is a well-observed phenomenon that in such issues with assured allotment, institutional investors invest only in the last few days. This means the final over-subscription number will rise to an even higher level.
Billionaire Mukesh Ambani and promoter group had pledged to subscribe to the full extent of their rights entitlements and any unsubscribed portion of the issue.
RIL has a very large number of shareholders — over 25.4 lakh retail shareholders, over 1,700 institutional investors — domestic as well as foreign.
The significantly strong subscription numbers show the high level of confidence every category of shareholders has in the company’s future and the promoters’ commitment to creating value for them even in the times of COVID, sources said.
The oversubscription numbers of RIL’s rights issue are better than other comparable issues of the recent past. Bharti Airtel and Vodafone Idea’s rights issues were oversubscribed by 5-8 pe cent. Each one of them was less than half the size of RIL’s rights issue.
Earlier, RIL created a whole new trading instrument in the form of REs which had premium valuation, liquidity and interest engaging quality investors. The REs never traded at below intrinsic during the renunciation period, which is a milestone in Indian capital markets.
RIL-REs had created a value of about Rs 9,500 crore for the company’s shareholders, when the online trading ended on May 29.
RIL’s first rights issue in three decades is set to close on June 03.
In the rights issue, the company is offering one share for every 15 shares held at Rs 1,257.
RIL on BSE closed at Rs 1520.45 on Monday.
The company, as per the issue offer document, will use three-fourth of the proceeds of its mega rights issue for repayment of some of its borrowings.
The company expects net proceeds of Rs 53,036.13 crore from the rights issue after accounting for legal and other expenses.
Out of these, Rs 39,755.08 crore would go towards “repayment/ prepayment of all or a portion of certain borrowings availed by company,” it said.
The remaining Rs 13,281.05 crore would be used for general corporate purposes.
Shareholders will have to pay only 25 per cent for subscribing to the company’s mega Rs 53,125-crore rights issue, and the balance will have to be paid in two installments in May and November next year, the company said.
Of the Rs 1,257 per share price, only 25 per cent is to be paid at the time of subscription. A similar amount will be due for payment in May 2021 and the balance 50 per cent has to be paid in November 2021, the company said.
“On Application, investors will have to pay Rs 314.25 per rights equity share, which constitutes 25 per cent of the issue price and the balance Rs 942.75 per rights equity share, which constitutes 75 per cent of the issue price, will have to be paid, on one or more subsequent call(s),” it said.
In May 2021, they will have to pay Rs 314.25, and balance Rs 628.50 is to be paid in November 2021.
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.
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.
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 and private equity firms.
It is also 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.