RIL reclaims Rs 10 trillion m-cap; stock gains for the fourth straight day

The company's rights issue was subscribed 1.59 times

Reliance Industries (RIL) reclaimed the 10 trillion market capitalisation on Thursday as shares of the company gained for the fourth straight day. The stock ended around 2.5 per cent higher at Rs 1,580 on the BSE. in an otherwise range-bound market after the company said it has received an overwhelming response to its rights issue worth Rs 53,124 crore, which was subscribed 1.59 times.

In the past four trading days, the stock has rallied 7 per cent, as compared to a 5 per cent rise in the S&P BSE Sensex. It was 2 per cent away from its lifetime high level of Rs 1,603 (adjusted to 1:15 rights issue), touched on December 20, 2019.

The company has achieved successful closure of India’s largest ever rights issue of Rs 53,124.20 crore. It was subscribed approximately 1.59 times, cumulating to an overall commitment of over Rs 84,000 crore.

“The rights issue saw a huge investor interest, including from lakhs of small investors and thousands of institutional investors, both Indian and foreign. The public portion of the Rights issue was subscribed 1.22 times,” RIL said in a press release.

The allotment of equity shares will happen on or around June 10, 2020. The rights shares are expected to be listed on the BSE and NSE on or around June 12, 2020 under separate ISIN, it said.

Analysts at Edelweiss Securities expects RIL to monetise 20 per cent of Jio; this, along with partial proceeds from the rights issue and sale of fuel retail, not to mention free cash flow (FCF), would lead to cash proceeds of Rs 1.3 trillion, thereby putting the company on the path to zero net debt in FY21.

“RIL has successfully managed to position itself as a zero-debt tech company in an environment of the virtual economy taking precedence over real. This has the added advantage of taking attention away from a weaker near-term refining outlook. Positive triggers for the stock will continue to be partnerships that reaffirm or fortify this position: tech (Jio+JioMart) and zero debt (Aramco, fibre),” the brokerage firm said in company update.

“For the stock to move higher, we need to see positive news flow on Jio’s delivering both subscriber additions and ARPU increases. Retail should continue to report strong growth, as RIL remains focused on store expansion, with scope for margin expansion,” analysts at JP Morgan said in recent report.

The proposed Aramco stake sale is very much on, and we do not see any large delays associated with the sale. Progress on the stake sale to Aramco is most important, in our view, as it is the centerpiece of RIL’s de-leveraging strategy, the brokerage firm said with ‘neutral’ rating on the stock.

At 11:19 am, RIL was trading 1.4 per cent higher at Rs 1,564 on the BSE, as compared to 0.2 per cent decline in the S&P BSE Sensex. A combined around 5.1 million equity shares have changed hands on the counter on the NSE and BSE so far.