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RIL Rights Issue 1.1 times oversubscribed with two days to go

Mumbai: Reliance Industries Limited’s (RIL), right issue got 1.1 times oversubscribed on Monday. It got oversubscribed two days before closing of the issue on Wednesday, June 3. India’s largest ever fund-raising initiative – RIL’s will raise Rs 53,124 crore. Despite, national lockdown due to Covid19 outbreak, the right issue received a resounding response from all its shareholders.

The issue subscription data on stock exchanges showed that at 5 PM on Monday total bids received for RIL’s Rights shares stood at 46.04 crore overshooting the 42.26 crore shares on offer by 8.9%. Wherein, Bombay Stock Exchange (BSE) has received applications for 44.85 crore Rights Shares while National Stock Exchange (NSE) has received applications for 0.57 crore Rights Shares. The non-ASBA bid quantity stands at 0.62 crore Rights Shares (received at Registrar thru ‘R-WAP’).

The over subscription figure indicates that shareholders are applying 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 oversubscription number are likely to rise to an even higher level.

RIL enjoys support of a very large number of shareholders. It has over 25.4 lakh retail shareholders, followed by over 1,700 institutional investors including domestic and foreign, are invested in the company.

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 create value for them even in the times of Covid19. The over subscription numbers of RIL’s Rights Issue are markedly better than other comparable Issues of recent past. Media reports suggests Bharti Airtel and Vodafone Idea’s Rights Issues in April – May 2019 were oversubscribed by 5%-8%. Each one was less than half the size of RIL’s rights issue.

Earlier, RIL created a whole new trading instrument in the form of Right Entitlements (RE) 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. It is observed that REs traded at an average 43% discount to intrinsic value in similar issues of the recent past.

RIL-REs had created a value of Rs 9,500 crore for the company’s shareholders, when the online trading ended on Friday, May 29. RIL’s first Rights Issue in three decades is set to close on June 03, 2020.

The company has come out with a Rights Issue in 1:15 ratio to enable all shareholders participate in its growth Consumer / Technology businesses, where new strategic investors have started joining. To keep the issue most investor friendly the Rights Issue price of Rs 1257 is to be paid over 18 months in three installments – 25% on application by June 03, 2020, 25% in May 2021 and 50% in November 2021.