Reliance Industries Ltd plans to raise ₹53,215 crore by selling shares to existing investors, the biggest such fundraising by a company in India, as the energy conglomerate aims to wipe off its massive debt.
Shareholders of Reliance will be offered one new share for every 15 held at ₹1,257 apiece, a discount of 14% to Thursday’s closing price of ₹1,467.05. It’s the first such share sale by India’s most valuable firm in three decades.
Shareholders willing to subscribe to the issue will have to pay 25% on application and the rest in one or more tranches.
The announcement of the record fundraising came after the company reported a sharp drop in quarterly profit because of a slump in fuel sales due to lockdowns around the world. RIL reported a consolidated profit of ₹6,348 crore in the quarter to March, a 39% decline from ₹10,362 crore a year ago.
It said earnings were impacted by a one-time loss of ₹4,267 crore due to a fall in fuel prices and demand destruction post covid-19. Revenue from operations for the March quarter fell 2.4% to ₹1.36 trillion.
For the full year, RIL recorded a 0.1% rise in consolidated profit (after exceptional item) at ₹39,880 crore, against ₹39,837 crore in FY19. Revenue rose 5.4% to ₹659,205 crore in FY20.
Gross refining margins in the March quarter were $8.9 per barrel, outperforming Singapore complex margins by $7.7 per barrel, the company said.
“Covid-19 is significantly impacting business operation of the firms, by way of interruption in production, supply chain disruption, unavailability of personnel, closure/lockdown of production facilities, etc. Further, during March 2020/April 2020, there has been significant volatility in oil prices, resulting in reduction in oil prices,” an RIL note said.
At 50% shareholding, Mukesh Ambani, Asia’s richest man, will have to pump in at least ₹26,600 crore to subscribe to his portion of the rights issue. Ambani and other controlling shareholders have pledged to buy to the full extent of their entitlement and also subscribe to all unsold shares in the rights issue, Reliance said in a statement.
The previous biggest share sales in India were the rights issues of Bharti Airtel Ltd and Vodafone Idea Ltd, both of whom raised around ₹25,000 crore each. The biggest initial share sale was that of Coal India Ltd, which raised ₹15,200 crore in 2010, while State Bank of India’s ₹15,000 crore sale to institutional investors in 2017 was the biggest such sale.
RIL is expected to hire as many as seven investment banks as early as next week to manage the share sale, a person aware of the company’s plans said, seeking anonymity.
These fundraising efforts are part of the company’s plans to become a zero-debt company by the end of March 2021. Reliance’s net debt stood at ₹1.53 trillion as of 31 December.
Commenting on the results, Ambani said, “Our oil to chemicals (O2C) businesses delivered sustained earnings due to its integrated portfolio, cost-competitiveness, feedstock flexibility and product placement capabilities. We continue to operate all our major facilities at near normal utilisation levels.” RIL said that in spite of the covid crisis, the due-diligence by Saudi Aramco for the planned investment in the O2C business is on track.