RIL nears record high ahead of rights issue, zooms 84% from March low

Shares of Reliance Industries (RIL) gained 3.4 per cent at Rs 1,615 on the BSE on Monday after the company fixed Thursday (May 14) as the record date for determining shareholders eligible to apply for its rights issue of Rs 53,125 crore. The stock was trading close to its record high of Rs 1,618, touched on December 20, 2019.

RIL had, on April 30, announced fundraising of Rs 53,125 crore by the way of a 1:15 rights issue, the first such issue by RIL in nearly three decades. One share will be offered for every 15 shares held at Rs 1,257, a 14 per cent discount to the closing price for April 30.

In the past three trading days, RIL's stock has rallied 10 per cent after the company announced that US-based private equity firm Vista Equity will invest Rs 11,367 crore into Jio Platforms, a wholly-owned subsidiary of the company.

Jio Platforms has now raised Rs 60,596.37 crore from leading technology investors in less than three weeks. This is a third major equity deal for Jio Platforms in three weeks — it previously sold a 9.9 per cent stake to Facebook for Rs 43,534 crore, and then 1.5 per cent to Silver Lake for Rs 5,655 crore.

With past three days’ rally, RIL has recovered 84 per cent from its 52-week low of Rs 876, touched in intra-day deal on March 23.

RJio should garner revenue/EBITDA CAGR of 22 per cent/44 per cent over FY20-22E along with strong EBITDA margin expansion. Although the company has witnessed subdued ARPU growth in 4QFY20, brokerage firm Motilal Oswal Securities believes this could be due to longer validity plans and full benefit of the price hike should accrue in FY21.

Further, the favorable competitive landscape in the Indian telecom industry could offer healthy incremental EBITDA gain through a combination of ARPU increase and market share gains. Due to RJio’s lower debt and market leadership position, the company should garner premium valuations as compared to competitors, the brokerage firm said in stock update.