Investors swipe right on RIL’s rights issue

MUMBAI: The rights entitlement price for Reliance Industries Ltd’s (RIL) ₹53,125-crore share sale to existing stockholders jumped 33.2% on BSE on Wednesday, as investors seeking a slice of action looked to buy the entitlement from existing shareholders.

In January, the markets regulator had allowed shareholders entitled to buy stocks in a rights issue to sell their entitlements on exchanges, which are traded just like any other securities. Those wishing to buy rights shares can buy these entitlements.

The RIL rights issue, which opened on Wednesday, is the first since the Sebi introduced the facility earlier this year. The issue is open till June 3 and the rights entitlements can be traded till May 29. The trading window on exchanges allows shareholders to sell their rights entitlement to others interested in the issue.

The rights entitlement price is the difference between the underlying stock’s previous closing price and the rights issue price. On Wednesday, RIL’s Rights Entitlements began trading at ₹151.15—the difference between RIL’s previous closing price of ₹1,408.15, and its rights issue price of ₹1,257. The Rights Entitlements ended at ₹201.35, up ₹50.20. Meanwhile, shares of RIL rose 1.88% to ₹1,434.65.

The RIL rights issue allows an existing shareholder to buy one new share for every 15 held. According to the terms of the offering, buyers will have to pay 25% of the price at the time of subscription, 25% in May 2021 and the rest in November 2021. So, someone who wants to merely maintain shareholding at the same level can also go for these entitlements, by selling the equivalent of original shares and enjoy the balance liquidity till the next two calls in May 2021 and November 2021. It may also be bought by an investor who is bullish on RIL, but does not want to block the entire money at one go.

As of 5pm, investors had subscribed 0.27% of the shares on sale, according to data from stock exchanges. Subscription numbers for the first day don’t reveal much about interest as institutional investors tend to invest only towards the last few days.

BUYERS WILL HAVE TO PAY 25% OF THE PRICE AT SUBSCRIPTION, 25% IN MAY 2021 AND THE REST IN NOVEMBER 2021