India’s largest business conglomerate, Reliance Industries has proposed a rights issue to raise a whopping Rs 53,125 crore. What this means is that RIL will be raising Rs 53,125 crore through a 1:15 right issue, where one share will be offered for every 15 shares held at Rs 1,257 (a share).
This announcement came even as Reliance Industries announced a 37.2% decline in profit after tax year-on-year for the fourth quarter of FY2019-20 at Rs 6,546 crore ($0.9 billion).
A rights issue is a way of a listed company to raise funds by inviting existing shareholders of the company to buy additional shares at a specific price. The promoters of the company have said that apart from subscribing to the entitlement fully, they will also buy unsubscribed shares, if any. The company said that price for the Rights Issue is at Rs 1,257
This has been done with the aim of raising funds for the company and pare debt as the oil-to-telecom conglomerate aims to be a zero net debt company by March 2021. Outstanding debt of RIL as on March 31, 2020 was Rs 336,294 crore ($44.4 billion).
Reliance said in a statement that the proposed Rights Issuance will be the first by RIL in three decades. The issue will be structured as partly paid shares and will enable shareholders to phase out the outlay on their investment over a period of time. This is also the largest equity offering in the equity markets in India ever.
“Diversified earnings streams and conservative Balance Sheet place Reliance at an advantaged position to face the ongoing macro challenges. S&P and Moody’s have both reaffirmed Reliance’s investment grade ratings,” the company said in a statement.
This announcement came as Reliance Industries announced its financial results for Q4 and FY20.
Reliance Industries announced a 37.2% decline in profit after tax for the fourth quarter of FY2019-20 at Rs 6,546 crore ($ 0.9 billion) as against Rs 10,427 crore in the corresponding period of the previous year.
Revenue from operations for the March quarter declined 2.4% to Rs 1,36,240 crore on year-on-year basis.
For the financial year ended March 2020, RIL saw a 0.1% rise in consolidated profit at Rs 39,880 crore, and a 5.4% rise in revenue at Rs 659,205 crore in FY20.
The company said its earnings in Q4were impacted by an exceptional loss of Rs 4,267 crore as the fall out of COVID-19 outbreak on economic activity disrupted businesses across manufacturing and services sectors.
“Global oil markets witnessed significant volatility on account of demand destruction and excess supplies. Lockdowns and travel restrictions in most geographies led to steep fall in transportation fuel demand. Global oil demand in CY2020 is expected to fall by 9.3 mb/d Y-o-Y, lowest level in last 8-years. As a result, global refining utilization and economics are likely to get impacted in the near term,” the company said in a statement, adding that non-grocery retail business was impacted by nation-wide lockdown.
In terms of segment-wise revenue, Reliance Jio’s profits shot up nearly three times, with a net profit of Rs 2,331 in Q4, which came due to an addition in subscribers as well as a tariff hike, which led to the Average Revenue Per User (ARPU) increasing as well. Quarterly operating revenue increased 26.6% YoY to Rs 14,835 crore
Jio’s net profit increased from Rs 2,964 crore in FY19 to Rs 5,562 crore in FY20, an 88% increase.
After Facebook announced a mega investment in the company, RIL has further said that the company has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months.
FY20 revenue from the Refining & Marketing segment declined by 1.6% Y-o-Y to Rs 387,522 crore ($51.2 billion) and EBIT decreased by 6.8% Y-o-Y to Rs 21,334 crore ($ 2.8 billion).
It also announced that in spite of the Covid-19 crisis and the lockdowns, the due-diligence by Saudi Aramco for the planned investment in the O2C business is on track as both the parties are committed and actively engaged.
R&M segment revenue was impacted due to lower price realizations in domestic as well as export market due to fall in crude prices. Its gross refining margins (GRM) for FY20 was at $ 8.9/bbl, outperforming Singapore complex margins by $5.7/bbl.