Home > Markets > Stock Markets > Investors swipe right on RIL’s mega issue

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

In January, the markets regulator allowed shareholders entitled to buy stocks in a rights issue to sell their entitlements on stock exchanges, which are then 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 Securities and Exchange Board of India (Sebi) introduced the facility earlier this year. The issue is open till 3 June and the rights entitlements can be traded till 29 May. The trading window on stock 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 subscribed 0.27% of the shares on sale, according to data from stock exchanges. To be sure, the subscription numbers for the first day don’t reveal much about investor interest as institutional investors tend to invest only towards the last few days .

Analysts said the premium on the entitlement reflects strong appetite for RIL shares.

“Reliance Rights Entitlement may be sold by a shareholder if he is not too bullish on the immediate prospects of the company and is looking to buy the main shares at lower level. In the period of offer, there may be a lot of traders who would trade in these (not intra-day) as this will track Reliance’s stock price. For a much lower outgo, they will be able to track the move in the main share," said Deepak Jasani, research head of HDFC Securities.

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