What is Reliance Industries Ltd. rights issue?

What is the rights issue?

Before discussing the Reliance's right issue, we need to understand what a rights issue is. It is an invitation to the existing shareholders in which a shareholder has a right to purchase shares at a discounted price. Existing shareholder of a company get three options:

Exercise their right to buy the shares at a discounted price.
Renounce their right to buy the share. It can be done by selling their right on the market which can be exercised by another investor.
Do nothing.

What is Reliance's rights issue, and why are they issuing them?

On May 16, Reliance Industries Ltd announced that it would open its Rs. 53,215 crore rights issue for the subscription. They set the rights issue price at Rs. 1257 which is 14 percent discount to the last closing price (Rs. 1459) on May 15. May 14 is the record date for the rights issue, which means only shareholders who own the shares of the company by that date are eligible to participate in exercising the rights issues. Each shareholder who owns more than 15 shares of Reliance Industries can buy one stock for every 15 shares at a discount rate of Rs 1257.

Reliance is issuing these rights to raise money to become a zero net-debt company by March 2021. They are at a net-debt of Rs 1,61,035 crore, but in the last three weeks, they have raised money from Facebook, Silver Lake, and Vista equity partners. Read more - Reliance Jio: Three big deals in three weeks, Why?

How to exercise Reliance's rights issues

Reliance's rights issues are available between May 20 to June 3.

If you are using one of these trading platforms, follow the links provided below on how to apply for rights issues:

Conclusion

Reliance Industries is offering shares to the existing shareholders in the form of rights issues. The company wants to become a zero net-debt company by next year, and this step is one more step towards achieving this goal. All the rights issues can be exercised between May 20 and June 3.

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Reliance JIO: Three big deals in 3 weeks. Why?

"We have a very clear road map to becoming a zero-net-debt company within the next 18 months, that is by 31 March 2021," Mukesh Ambani (Chairman, Reliance industries) announced this in an annual general meeting (AGM) last year. He wants to bring the net-debt (not gross debt) from Rs 1,61,035 crore to zero by March 2021. He also set a target to grow the company's EBITDA by 15% annually over the next five years. Reliance was a debt-free company until 2012, but since then,debt has increased by 400%. Reliance's high net-debt: One of the primary reasons for the colossal debt of Reliance industries is the investment in Reliance Jio. The company has so far invested close to Rs 3 lakh crore in Jio, and the total debt grew by Rs 69,000 crore in just last year. Another reason is the Rs 1 lakh crore investment in the petrochemicals business in the last 10 years. ...

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Please download the stockylab app on app store to find out undervalued stocks. Read the terms of conditions of the app before taking decisions based on our recommendations. Made with Love ( StockyLab Team) On a mission to make stock picking easier for everyone. Resources: Economic Times Money Control CNBC Business Standard

Stocky Lab 1: EBITDA vs Net Income

Revenue The total amount of income generated from the business. Gross Profit Gross profit is revenue minus the cost of goods sold. For Ex: If flipkart has a revenue of Rs 1 Crore and the actual cost of goods sold is Rs 80 Lakh; then the gross profit is Rs 20 Lakh. What is EBITDA? EBITDA means Earnings before Interest Expense, Tax, Depreciation & Amortization. When you remove Operational Expense which general administrative expense, salaries, research & development, etc. Let's break it down. 1. Interest Expense - This is the interest that needs to be paid for any borrowings/debt. This value does not include the principal amount of the debt, but only interest on it. 2. Tax - This is the corporate tax a company needs to pay on its earnings for the year to the government. 3. Depreciation - Companies that have assets like manufacturing plants, vehicles, machinery, etc when they are bought are considered assets in the balance sheet. But they are expensed over time. For Ex: If ...

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