What is Reliance Industries Ltd. rights issue?

Finance Aug 30, 2020

What is the rights issue?

Before discussing the Reliance’s right issue, we need to understand what a rights issue is. It is an invitation to the existing shareholders in which a shareholder has a right to purchase shares at a discounted price. Existing shareholder of a company get three options:

  • Exercise their right to buy the shares at a discounted price.
  • Renounce their right to buy the share. It can be done by selling their right on the market which can be exercised by another investor.
  • Do nothing.

What is Reliance’s rights issue, and why are they issuing them?

On May 16, Reliance Industries Ltd announced that it would open its Rs. 53,215 crore rights issue for the subscription. They set the rights issue price at Rs. 1257 which is 14 percent discount to the last closing price (Rs. 1459) on May 15. May 14 is the record date for the rights issue, which means only shareholders who own the shares of the company by that date are eligible to participate in exercising the rights issues. Each shareholder who owns more than 15 shares of Reliance Industries can buy one stock for every 15 shares at a discount rate of Rs 1257.

Reliance is issuing these rights to raise money to become a zero net-debt company by March 2021. They are at a net-debt of Rs 1,61,035 crore, but in the last three weeks, they have raised money from Facebook, Silver Lake, and Vista equity partners. Read more — Reliance Jio: Three big deals in three weeks, Why?

How to exercise Reliance’s rights issues

Reliance’s rights issues are available between May 20 to June 3.

If you are using one of these trading platforms, follow the links provided below on how to apply for rights issues:

Conclusion

Reliance Industries is offering shares to the existing shareholders in the form of rights issues. The company wants to become a zero net-debt company by next year, and this step is one more step towards achieving this goal. All the rights issues can be exercised between May 20 and June 3.

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