Reliance to use 75% of the rights issue to repay debt

Reliance Industries will use three-fourth of proceeds of its mega rights issue for repayment of some of its borrowings, according to offer document.

The company expects net proceeds of Rs 53,036.13 crore from the rights issue that opens on May 20 and closes on June 3.

Out of these, Rs 39,755.08 crore would go towards "repayment/ prepayment of all or a portion of certain borrowings availed by company," it said.

The remaining Rs 13,281.05 crore would be used for general corporate purposes.

Shareholders will have to pay only 25 per cent for subscribing to the company's mega Rs 53,125-crore rights issue, and the balance will have to be paid in two installments in May and November next year, the company said.

One share will be offered for every 15 shares held at Rs 1,257.

Of the Rs 1,257 per share price, only 25 per cent is to be paid at the time of subscription. A similar amount will be due for payment in May 2021 and the balance 50 per cent has to be paid in November 2021, the company said.

"On Application, investors will have to pay Rs 314.25 per rights equity share, which constitutes 25 per cent of the issue price and the balance Rs 942.75 per rights equity share which constitutes 75 per cent of the issue price, will have to be paid, on one or more subsequent call(s)," it said.

In May 2021, they will have to pay Rs 314.25, and balance Rs 628.50 is to be paid in November 2021.

The last date for shareholders wishing to do an on market renunciation is May 29.

Out of the net proceeds of Rs 53,036.13 crore, three-fourth will be used to repay/repay either fully or partly the Rs 16,350 crore of commercial papers and Rs 36,213 crore of non-convertible debentures, the offer document said.

"Our promoter and promoter group, by way of their letters dated May 15, 2020, have confirmed to subscribe to the full extent of their rights entitlements" and any unsubscribed portion of the issue, the offer document said.

Billionaire Mukesh Ambani's firm had on April 30 announced fund raising of Rs 53,125 crore by way of a 1:15 rights issue - India's biggest and first such issue by the firm in nearly three decades.

One share will be offered for every 15 shares held at Rs 1,257. Reliance Industries' shares closed at Rs 1,408 on the BSE.

The last time RIL tapped the public for funds was in 1991 when it had issued convertible debentures. The debentures were subsequently converted into equity shares at Rs 55 apiece.

Ambani had in August last year unveiled plans to cut debt to zero by 2021. As part of this plan, RIL has been seeking strategic partnerships across its businesses, while targeting to deleverage the balance sheet.

At the end of March quarter, RIL had an outstanding debt of Rs 3,36,294 crore. It also had cash in hand of Rs 1,75,259 crore, bringing the net debt position to Rs 1,61,035 crore.

As part of its balance sheet deleveraging plans, Reliance has sold a minority stake in its digital unit, Jio Platforms to the likes of Facebook.

It is also talking to Saudi Aramco for selling a fifth of its oil-to-chemicals business for an asking of USD 15 billion and has sold half of its fuel retail venture to BP Plc for Rs 7,000 crore and telecommunication tower business to Brookfield for Rs 25,200 crore.

Together, proceeds from these transactions will result in a reduction in RIL's net debt.