Reliance Industries-Rights Entitlement (RIL-RE) soared over 40% on day 1, taking the total with rights issue price over the actual RIL share price. Today, as of 10 AM, RIL-RE shares were trading 0.77 per cent lower to Rs 200.60 on NSE. At Wednesday’s closing, RIL-RE shares soared to Rs 214 on NSE, which was Rs 34 higher than the spread between Reliance Industries share price of Rs 1,437.40 and rights issue of Rs 1,257. Analysts are upbeat on this rights issue recommending it to ‘buy’. “We are recommending investors to subscribe to the rights issue of Reliance Industries Ltd as we are positive on the future prospects of the company on the back of strong traction in digital and retail business,” said Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd.
What does Sebi’s ‘rights entitlement’ platform mean for traders and investors?
It is for the first time that Rights Entitlement (RE) shares were allowed to trade in India after market regulator Sebi introduced this platform earlier this year. “India’s largest rights issue will test the RE platform to see how resilient it is at technical and settlement factors as this also partially paid issue,” Ravi Singh, Head of Research, Karvy Stock Broking told to Financial Express Online. “The success/shortcomings of this platform would dictate future norms and response to the subscription percentage to the rights issues in the future,” Singh added.
How does Sebi’s ‘rights entitlement’ platform used by RIL-RE help shareholders?
So far in previous rights issues, some of the shareholders who had entitlement to the rights shares either subscribed, or transferred it to the other buyers at a little or no cost, or left it to renunciate, says Ravi Singh. Suggesting Sebi’s Rights Entitlement (RE) platform a good move for the investors or shareholders, Ravi Singh said: “The platform will help the rights entitled shareholders, who opt to renunciate to get a fair value for their rights entitlements by trading across this RE platform.” Describing it as a win-win situation for both the buyers and sellers, he added that the rights sellers may get anywhere between Rs 130 to Rs 190 for each entitlement, the buyers may get a yield of around 13.50% to 18% on an average. “Since intraday trading is not possible that may affect the liquidity to an extent, it is still a good platform for speculators for the remaining 9 trading days,” Singh said.
As of 5 PM yesterday, investors subscribed 0.27 per cent of the shares on sale, according to data from stock exchanges. India’s biggest-ever rights issue will remain open for the eligible investors for 14 days and the rights entitlements can be traded till May 29. The company is offering shares to existing investors in the ratio of 1:15 at a price of Rs 1,257 per share. The investors who wish to subscribe need not pay the entire amount in one go. The company has asked investors to pay only 25 per cent at the time of subscription. While out of the rest 75 per cent, investors will have to pay 25 per cent in May 2021 and the remaining 50 per cent in November next year.