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Finally somebody hit the nail hard with this analysis and not living in some utopian la-la land.

 
Friends, many guys are saying that Reliance is MANAGING the Positive News Flow lately, for making sure that its Rights Issues passes through SUCCESSFULLY.

Could anyone please explain, how or why could this Rights Issue "FAIL" ? Is it like some IPO which would fail, if it does not gets the subscribers, or what ? And what exactly needs to happen in the Reliance Stock Price, which might cause this issue to fail ? What should be price of Reliance on 14 May 2020 in order to make this issue a failure or success ?

And suppose the Rights Issue somehow fails in realty, then what will be the consequences for Ambani because of that ?

Some basic info about this whole issue is given in this article, but I am not being able to figure out, why is it so important for Ambani ? Few people are saying that he will be putting in Rs 25000 crore into this, from his own personal pocket - is this statement true, or if it is also part of the plan to create a false impression and then later on he could simply walk away without honoring this commitment ?

https://finshots.in/archive/reliance-rights-issue/

The Story
It’s been no secret that Mr Mukesh Ambani has been trying to reduce the debt burden at Reliance Industries Ltd (RIL) for a while now. It’s been a personal mission of sorts and he’s gone to extreme lengths to ensure he musters enough cash to make RIL net debt-free by 2021 i.e. the company would still have some debt, but they’d have more than enough cash to cover for it.

That was the promise.

And to this end, Reliance has been wooing investors from all over the world. First, there were talks of Saudi Aramco (Saudi’s state-owned oil producer) coming in and buying part ownership at Reliance Industries. The deal was supposed to go through this year.

But Aramco has had a few hiccups of late.

The company’s IPO did not live up to the hype. Most people expected it to raise anywhere between $20 Billion to $40 Billion from the public at a valuation of close to $2 Trillion. Unfortunately, with oil prices going into a tailspin, the company is now being valued at ~$1.6 Trillion. So the RIL-Aramco deal is likely to stay on the backburner for now.

On the flip side, however, Facebook walked in and swooped parts of Reliance Jio by offering a whopping $5.7 Billion in cash — part of which was soon channelled into reducing the debt.

But to meet the lofty promise, the company needs more money. So now they are turning back to existing investors — people who own parts of RIL to step in and help with the debt burden. They are going for a Rights Issue.

And here’s what’s going to happen. The company will issue 41 crore new shares at a discount of 14%.

Discount to what?

Discount to the prevailing market price of course — The price that was being quoted in the open market as on April 30.


But what’s with the discount? Why is Reliance offering these new shares at a lower price?

Well, the answer is simple. You can’t entice people to buy new shares of your company if you are offering it at a price that’s already being quoted outside. I mean, I could simply open my trading account and buy the stock at the current market price. Why would I buy it at a premium from RIL? So to make it more appealing, Reliance is offering a discount.

But not everybody can subscribe to the rights issue. You can only be a part of this little exercise only if you owned Reliance stocks.

And if you owned Reliance shares as on record date (yet to be announced), then you’ll be entitled to one new share for every 15 shares held in the company. All at a discounted price of ₹1257.

But what if you don’t have the money to buy these new shares? Or what if you simply don't care about the rights issue.

Well, in that case, somebody else will buy the issue instead. Maybe Mr Mukesh Ambani himself (the promoter group) or some other individual who owns RIL shares. Could be anybody. But in all likelihood, somebody is going to buy it anyway.

Also, remember that when this issue happens, you don’t get the shares immediately. Instead, you get the right to buy these shares at a discounted price. That’s a subtle, yet important distinction.

Because once you get the rights, you can actually sell the rights to someone else if they are willing to buy it off of you. Maybe make a small bargain in the process?

It’s possible and this brings us to the last point.

RIL is expected to raise close to ₹53,125 crores through this little program and if all goes well, this will be the largest Rights issue ever.
 

siddhant4u

Well-Unknown Member
Friends, many guys are saying that Reliance is MANAGING the Positive News Flow lately, for making sure that its Rights Issues passes through SUCCESSFULLY.

Could anyone please explain, how or why could this Rights Issue "FAIL" ? Is it like some IPO which would fail, if it does not gets the subscribers, or what ? And what exactly needs to happen in the Reliance Stock Price, which might cause this issue to fail ? What should be price of Reliance on 14 May 2020 in order to make this issue a failure or success ?

And suppose the Rights Issue somehow fails in realty, then what will be the consequences for Ambani because of that ?

Some basic info about this whole issue is given in this article, but I am not being able to figure out, why is it so important for Ambani ? Few people are saying that he will be putting in Rs 25000 crore into this, from his own personal pocket - is this statement true, or if it is also part of the plan to create a false impression and then later on he could simply walk away without honoring this commitment ?

https://finshots.in/archive/reliance-rights-issue/
It will not fail. Its just that rights issue is costly that all (before jio investment starts pouring in)

Ambani said, he and other promotors will subscribe to rights issue (they hold 50% so 25,000 cr will be invested from their pocket to buy rights issue) on top promotors will subscribe to whatever leftover rights shares. For example with 15 share holding I chose not to subscribe, this one share will be bought by them.
this gives confidence to market and shareholders that promotors are willing to invest their own money.
 
It will not fail. Its just that rights issue is costly that all (before jio investment starts pouring in)

Ambani said, he and other promotors will subscribe to rights issue (they hold 50% so 25,000 cr will be invested from their pocket to buy rights issue) on top promotors will subscribe to whatever leftover rights shares. For example with 15 share holding I chose not to subscribe, this one share will be bought by them.
this gives confidence to market and shareholders that promotors are willing to invest their own money.
My main concern is how are promoters going to arrange for this money (25000 cr is not small amount) and most of their wealth is invested in reliance itself.
 

travi

Well-Known Member
My main concern is how are promoters going to arrange for this money (25000 cr is not small amount) and most of their wealth is invested in reliance itself.
ratio is 15:1 so look at it from that angle also.
In this proportion, not much load per head.

Even i can buy and sell in open mkt next day :D
This is not like dividend that price will get adjust at open after record date.
This is going to happen, hence the story about price correction post the record date.
 

siddhant4u

Well-Unknown Member
My main concern is how are promoters going to arrange for this money (25000 cr is not small amount) and most of their wealth is invested in reliance itself.
that's the trick. you have to pay 25% upfront rest later on.

you go to bank, pledge your shares and get loan that's what ambani's must be doing. they already hold so many shares they could easily avail loan facility for 25,000 cr in personal capacity.
 
ratio is 15:1 so look at it from that angle also.
In this proportion, not much load per head.

Even i can buy and sell in open mkt next day :D
This is not like dividend that price will get adjust at open after record date.
Yes they will have to sell existing shares for liquidity unless something else has been arranged.

Price does gets adjusted but mcap will remain same.
 

siddhant4u

Well-Unknown Member
Yes they will have to sell existing shares for liquidity unless something else has been arranged.

Price does gets adjusted but mcap will remain same.
they will not sell existing shares, as they have to keep their precious 50% holding intact. but trading is alright and they might have done recently when it tanked 900
 

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