Reliance’s mega right issue world’s biggest by a non-financial issuer in 10 yrs

Reliance Industries mega Rs 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.

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 USD 7.002 billion issue by Bayer AG in June 2018.

Billionaire Mukesh Ambani’s firm had on April 30 announced fund raising of Rs 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 Rs 1,257, a 14 per cent 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 USD 19.57 billion issue by HSBC Holdings Plc in April 2009, according to Dealogic. Deutsche Bank’s USD 13.96 billion issue in October 2010 is the second biggest closely followed by USD 13.69 billion issue by UniCredit.

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

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