State-run Life Insurance Corp. of India (LIC), the largest institutional investor in the Mukesh Ambani-run Reliance Industries Ltd (RIL), will invest ₹2,500-3,000 crore in the company’s ongoing rights issue, said two people directly aware of the life insurer’s plans.
RIL’s massive ₹53,125 crore rights issue opened for subscription on 20 May.
“LIC plans to subscribe to more than 20 million or more shares of RIL in the rights issue. The proposal has been discussed internally and sent to LIC’s board for approval,” said one of the two persons mentioned above, who did not wish to be named as the internal decision was market-sensitive.
The insurer is convinced that an investment in RIL is likely to fetch an above-average return for all public investors, including LIC, in the medium to long term, as more than half a dozen large global investors have recently shown strong confidence in RIL’s businesses, especially in its digital assets subsidiary Jio Platforms Ltd, said this person.
This is also going to be one of the largest investments by the insurer in any company’s rights issue so far.
“LIC is likely to get the approval of its board for the rights issue investment latest by Monday. LIC has to keep the interest of policyholders as the foremost priority. It has been a long-term investor in RIL and it has benefited thousands of policyholders so far. RIL is no longer just an oil-and-gas company. It has shown tremendous strength in the digital payment and retail space,” said the second person, who also spoke on condition of anonymity.
At present, public shareholders have a 49.93% stake in RIL, of which LIC alone holds 6.01% or 3,71,805,415 shares.
The insurer, which is one of the largest domestic institutional investors, has often acted as the key indicator for many public institutional investors in the listed space. If LIC indeed invests in RIL’s rights issue, it may move a number of other smaller domestic investors into putting in money in RIL’s ongoing mega share sale.
The issue, which closes for subscription on 3 June, is the largest such share sale the country has seen. The previous record was held by Bharti Airtel Ltd and Vodafone Idea Ltd, both of which raised around ₹25,000 crore in 2019. Reliance has hired a banker syndicate comprising 14 investment banks to manage the share sale. These include including Morgan Stanley, Citi, Bank of America and Axis Capital.
Ahead of its rights issue, RIL’s subsidiary Jio Platforms has already attracted investments worth $10 billion in just a month from marquee investors including Facebook Inc. and global private equity players such as KKR & Co. Inc., Silver Lake, Vista Equity Partners and General Atlantic.
These deals and the rights issue are aimed at helping RIL reach its ambitious goal of becoming a zero net-debt company by March 2021. The company had a net debt of ₹1.53 trillion as of 31 December.