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Reliance Industries Ltd Announces Massive INR53,125cr ($7bn) Rights Issue

Professor of Financial Economics and Part-time Value Investor, Transfin.
May 2, 2020 2:40 AM 5 min read
Editorial

Reliance Industries Ltd has announced its first rights issue in three decades worth a massive ₹53,125cr ($7bn). The Ministry of Home Affairs (MHA) has issued an order under the Disaster Management Act, 2005 to further extend the nationwide lockdown for a period of two weeks beyond May 4th 2020. Non-subsidised LPG cylinder price cut by ₹162.50. Apple sales, profits grow marginally amidst the pandemic. 

 

 

 

INDIA

Lockdown extended by another two weeks from May 4th. 

It's Not Over

The Ministry of Home Affairs (MHA) has issued an order under the Disaster Management Act, 2005 to further extend the nationwide lockdown for a period of two weeks beyond May 4th 2020.

 

MHA has also issues new guidelines to regulate different activities in this period based on risk profiling of the districts of the country into Red (hotspot), green and orange zones.

 

There will be considerable relaxations in the districts falling in the Green and Orange Zones, MHA said. [NDTV]

 

Non-subsidised LPG cylinder price cut by ₹162.50.

Stay at Home, Cook at Home

In the steepest reduction ever, the price of non-subsidised cooking gas has been slashed by ₹162.50 a cylinder. As per a notification by state-owned oil companies, non-subsidised cooking gas now costs ₹581.50 per 14.2-kg cylinder in Delhi, down from ₹744 till Thursday.

 

This is the third straight monthly price reduction and it follows a global trend of falling rates as the coronavirus lockdowns diminish demand for fuel. [BS]

 

Three is Company

As per a report by Dun & Bradstreet, three things will shape the Indian economy post-COVID. These are the length of the lockdown, global recession and consumer behaviour. Read more on this here. [ET Indicators]

 

RIL RIGHTS ISSUE

Reliance Industries announces massive ₹53,125cr ($7bn) rights issue. 

The Mother of All Issues

Reliance Industries has announced its first rights issue in three decades (read press release here). And it’s going to be a mammoth one. The conglomerate plans to raise ₹53,125cr ($7bn) through this process of offering equity shares to existing shareholders at ₹1,257 ($16.68) per share.

 

The announcement comes after RIL’s Q4 results (read press release here) were released yesterday. The results, for the quarter ended March 31st, showed the company’s consolidated revenue declining 2.5% to ₹1.51Lcr ($20bn) and consolidated net profit falling 38.73% to ₹6,348cr ($842m).

 

Dreaming Debt-Free

With the rights issue, Jio-Facebook deal and BP’s investment in the previous fiscal, RIL expects to raise ₹1.04Lcr in the current quarter, en route to its goal of becoming a debt-free company before March 2021. [ET Markets]

 

BTW

For context, ₹53,125cr ($7bn) is more than what Indian markets managed to gather collectively in rights issues in all of 2019. Last year, 12 rights issues took place, including those of Bharti Airtel, Vodafone Idea, Tata Steel Long Products, Piramal Enterprises and Bajaj Electricals. [Financial Express]

 

FRANKLIN TEMPLETON

Agrees to give moratorium to 3 Future Group companies.  

The Ides of March

Franklin Templeton Mutual Fund, which closed six debt schemes last week that managed over $3bn, citing lack of liquidity in the debt market and unprecedented redemptions in these yield-oriented schemes, has agreed to give moratorium to three Future Group companies under the scheme announced by the RBI to help borrowers tide over the pandemic.

 

Franklin has given moratorium to Rivaaz Trade Ventures Pvt Ltd, Nufuture Digital India Ltd and Future Ideas Co Ltd., which it has funded through non-convertible debentures (NCD).

 

The schemes holding the debt papers of these three companies saw their net asset value (NAV) decline by 1.5% to 3.8% on Tuesday after rating agencies re-priced exposure to the Future Group firms. [Financial Express]

 

Read the Press Release here.

 

Company to stay put in India.

Stay Put

While the company might be caught in muddy waters, President of Franklin Templeton India, Sanjay Sapre, said that it has a range of other funds open and has no intention of exiting India. [FT]

 

US STOCKS

Apple sales, profits grow marginally amidst the pandemic. 

 Outliers

Tech giant Apple reported a slight uptick in revenue for its latest quarter even as the coronavirus shut down factories and dented sales in China.

 

Apple reported $58.3bn in its fiscal second quarter, up 1% from a year ago. Profit fell about 3% to $11.25bn. 

 

Apple’s services and wearables business proved to be the saving grace. App Store sales and AirPods wireless earbuds surged 18% to $19.63bn, reiterating the value of the behemoth's strategic shift from selling more devices to selling more services and accessories across those devices.

 

Meanwhile, sales of the company’s legacy products - the iPhone, iPad and Mac - fell nearly 7% to $38.68bn. [FT]

 

Amazon’s sales soar as online shopping surges.

Joining Suite

Ecommerce platform Amazon has reported an unusually well 26% rise in revenue to $75.5bn in the first three months of the year as countries worldwide went under lockdown in the wake of the virus and people turn to online shopping for their essentials. 

 

However this came at the expense of rising costs, pushing Amazon's Q1 profit down 29% from a year earlier to $2.5bn. [WSJ]

 

There's Always a But...!

However, Amazon reported that its India sales have taken a hit since the online retailer is currently fulfilling demand for only essential goods such as grocery in the country, and has cut back on a majority of its offerings. 

 

Essentials such as grocery form a small part of their overall business, which relies heavily on the sale of electronic goods, mobile phones and fashion products. [Livemint]

 

COVID-19 IMPACT

Top lawyers and consultants witness cut in fees as they telecommute. 

An Hourly Affair

Some top lawyers and consultants who charge clients by the hour and are now telecommuting have seen their fees slashed across assignments as cash-strapped clients renegotiate and question the time actually spent on the job. 

 

Many corporate law firms that charge anywhere between ₹20,000 ($265) and ₹75,000 ($995) per hour have slashed hourly rates or reduced the number of hours billed under pressure from clients, as per industry trackers. 

 

The big four - Deloitte, PwC, EY and KPMG - have seen these getting slashed by as much as 20-25% per hour. [ET Corporate Trends]

 

Maruti did not sell a single unit in domestic market in April.  

Zilch...

India's largest carmaker Maruti Suzuki India reported that it did not sell a single unit in the domestic market in April due to the nationwide lockdown. 

 

This was because in compliance with the Government orders all production facilities were closed, it added.

 

The company, however, exported 632 units from Mundra Port following resumption of port operations. [ToI]

 

Oil slips to around $26.

A Slippery Slope

Oil slipped to around $26 a barrel on back of weak demand due to the coronavirus crisis and excess supply pressured the market, even as OPEC and its allies began a record output cut. [Reuters]

FIN.

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