RIL, the oil-to-telecom major, plans to raise Rs 53,125 crore, through its rights offer, which opens May 20 and closes June 3.
This would help its debt reduction initiatives. In less than a month, RIL has cut four deals selling minority stakes in Jio Platforms to foreign investors and raised Rs 67,195 crore. Sunday's Rs 6,598.38 crore investment by General Atlantic, a leading global growth equity firm, for 1.34 per cent stake, values Jio Platforms at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 trillion.
Analysts at CLSA recently said that investments by tech-focused funds like Vista and Silver Lake, along with Facebook, will reposition Jio (Platforms) as a tech major rather than just a telcom operator. The deals will help RIL’s debt reduction initiative that remains an important trigger for the stock.
Though its legacy businesses of refining and marketing, and petrochemicals is feeling the heat of demand pressure due to the lockdown, and are in a down-cycle, RIL's diversified business model in which over half the equity value is derived from consumer-oriented businesses of telecom and retail is keeping analysts positive on the company's prospects.
Amongst other reasons are the promoter’s high commitment in the rights issue and also that only 25 per cent needs to be paid at the time of subscription. “The promoters subscribing to over half of the issue and any part unsubscribed portion too, instills confidence. While the partly paid-up shares may trade at slight discount, unlike a couple of others, they are likely to remain liquid,” says an analyst.
More importantly, the prospects of its consumer businesses appear brighter than ever.
Analysts at Axis Securities say, the discounted price of the rights issue provides an opportunity to participate in RIL's high growth consumer-oriented businesses. The rights issue price of Rs 1,257 is 13.8 per cent lower than Friday's close of Rs 1458.90. The rights issue will help the business re-rate, and allow additional value creation potential of Rs 100 per share as RIL will be in stronger position as the Saudi Aramco deal can happen at a later date, they add.
Another point in favour of the rights issue, analysts say, is that RIL is amongst the few companies that can withstand disruptions. “There are very few equity investment opportunities in current environment that offer some value unlocking triggers and investors need pay only 25 per cent at time of subscription which may influence them to consider subscribing to the rights issue,” said Deepak Jasani, head of retail research at HDFC Securities.
Speaking on liquidity of partly-paid shares, an analyst at a domestic brokerage said that RIL has large free float, and hence, trading in the partly paid shares should not be a concern.
A K Prabhakar, Head of Research at IDBI Capital, says, the partly paid up shares will trade at slight discount as there has to be an arbitrage opportunity to incentivise buyers, too. Nevertheless, the shares will remain liquid and should not be a problem.
There are other companies such as Tata Steel and Indiabulls Ventures, which continue to see their partly paid-up shares trade on the bourses.