Mukesh Ambani’s Reliance Industries Ltd (RIL) has decided to come up with the mother of all rights issues, as it plans to raise Rs 53,125 crore to trim its net debt. For context, RIL’s rights issue will fetch the company more funds than Indian markets managed to gather collectively through 12 rights issues in the calendar year 2019. Over the years domestic equity markets have seen a number of big names announce rights issues in an effort to raise capital by offering equity shares to existing shareholders, luring them in by offering the shares at a discounted price.
Two of the biggest rights issues that the domestic equity markets witnessed in the past year were that of telecom giants Bharti Airtel and Vodafone Idea. The record date for both these issues was in April 2019, with Bharti Airtel offering shares at a price of Rs 220 and Vodafone Idea offering at Rs 12.50. However, the story since then has not been the same. While investors who subscribed to the Bharti Airtel Rights issue have pocketed as much as 70% gains till February this year, those who put their money in Vodafone Idea have seen their investment fall 74% to date. Both issues were oversubscribed.
Another rights issue that entered the market in 2019 was that of Tata Steel Long Products. The Rs 1,650 crore issue with a subscription ratio of 15:7 saw shares being offered at a price of Rs 500. Since the issue in June last year, the scrip has only seen a southward trajectory, going down by 56%.
Piramal Enterprises and Bajaj Electricals are two of the latest rights issues. While the issue of Ajay Piramal’s firm was oversubscribed helping the company raise over Rs 3,600 crore. The offer price was Rs 1,300 but the stock did not help investors much as the markets, soon after the rights issue, came under attack from the novel coronavirus pandemic. The stock closed at a price of Rs 988 per share on Thursday. Bajaj Electricals rights issue was over-subscribed by 1.28 times. The firm, however, raised Rs 349.93 crore against the original issue size of Rs 349.99 crore. The shortfall was aided by the moratorium placed by RBI on applications received through Yes Bank. 2,186 Rights Equity Shares of applicants who subscribed to the Rights Equity using Applications Supported by Blocked Amount (ASBA) facility of Yes Bank have been kept in abeyance. Bajaj Electricals told Financial Express Online that the company will issue these shares to Yes Bank applicants once funds are received. The issue was oversubscribed by the promoters as well as the public, to the extent of 128.79%. The share price of Bajaj Electricals has jumped from recent lows to now trade at Rs 340 apiece, up from the offer price of Rs 310 per share.
RIL’s rights issue of Rs 53,125 crore will be fully subscribed as promoters have decided to subscribe to any portion that is not fully subscribed by any category of investors. Experts believe that the rights issue will be an interesting opportunity for existing investors. RIL is yet to notify the market regulators about the record date for the rights issue.
