With a ratio of 1:15, RIL plans the largest offer of rights in India

MUMBAI: Trusted industries (RIL), India's most valued company, plans to raise Rs 53.125 billion through a rights offering of Rs 1,257 per share, a 14% discount on share closing on Thursday on BSE at Rs 1,467 . This is the first RIL public fundraiser in three decades and the largest offer of rights by a Indian company. Last year, Airtel had submitted rights offers of around Rs 25 billion each.

Existing RIL shareholders can buy one share for every 15 shares held, the company said in a statement. The problem will lead to a dilution of about 7%.

RIL President Mukesh Ambani and his family, the promoters of the company, own 50% of the company which is currently valued at Rs 9.3 lakh crore. Promoters will be involved in the rights issue by subscribing to shares valued at about Rs 26.56 billion to maintain their stake in the retail exploration company, the company said.

“An ideal way to increase equity is through Qualified Institutional Placement (QIP) or Preferred Placement (PA). But in a QIP, promoters cannot participate and will lead to dilution of their participations. In PA, promoters can participate, but are limited to acquiring up to 5% only. Additionally, they both have minimum price formulas to meet, said RippleWave Equity Advisors partner Mehul Savla. The issue of rights is the only option if developers want to infuse large amounts of funds beyond the 5% acquisition limit.

RIL also said that if any non-promoter does not participate in the RIL rights offer, the promoters will collect their share. This would result in their participation increasing further in the company.

RIL said that the issue will be structured as partially paid shares and will allow shareholders to gradually eliminate the disbursement of their investment over a period of time. The rights offering is RIL's latest attempt to shore up the balance sheet and follows its deal with Facebook, to which it is selling 9.9% on Jio Platforms (its digital services unit) for Rs 43,574 million.

RIL is looking to sell more stake in Jio Platforms in addition to planning to attract outside investors to its retail business. RIL said that as new strategic investors seek to partner and add value to the engines of consumer growth and technology, the issue of rights allows all shareholders to participate in it.

At RIL's annual shareholder meeting last year, he had promised shareholders that when the company reaches its zero net debt target by March 31, 2021, it will reward them with higher dividends and bond issues. On Thursday, RIL said the company will reach net debt-free status before its own established timeline. RIL has a net debt of Rs 1.61 lakh on its books. Issues of rights and other share sales aim to eliminate this net debt.