RIL rights issue: RIL rights entitlement price jumps for 2nd day, up 9% – The Economic Times

Clipped from: https://economictimes.indiatimes.com

This is first time in India that RE shares were allowed to trade after Sebi introduced this concept in January.

Mumbai: Reliance IndustriesNSE 0.53 %‘ rights entitlement (RIL-RE) price soared 9 per cent in Thursday’s trade, in addition to a 40 per cent rally the previous day.

By 11 am, the spread between the market price and rights issue of each Reliance Industries share widened to Rs 220 on NSE, up 8.58 per cent.

On Wednesday, RIL-RE closed at Rs 212 on NSE, which was Rs 32 higher than the spread between Reliance Industries market price of 1,437.40.

This is first time in India that RE shares were allowed to trade after Sebi introduced this concept in January.

RIL-RE shares will continue to trade on stock exchanges in T2T (Trade 2 Trade) segment till May 29 under RelianceLR code on BSE and RIL RE on NSE.

If an investor buys RIL-RE shares on or before May 29, s/he can claim the rights issue shares by paying the first instalment of 25 per cent or Rs 314.25 in June. Another 25 per cent will be paid by the investor in May 2021 and the balance 50 per cent i.e. Rs 628.50 per share will be paid in November 2021 on-call by the company.

In case the right issue holder decides to sell the rights, Prabhudas Lilladher calculates the breakeven of theoretical price for renunciation of right entitlement at Rs 210.

“However, given that buyer is taking the liability to pay Rs 1,096 after 18 months and risk to price change, we believe price to settle between Rs 153 (market price-right issue price) and Rs 175,” it said.

The Mukesh Ambani company is offering 1 share for every 15 held as of record date, which was May 14.

On Wednesday, while global depository receipts (GDR) and exchange traded funds (ETF) were the major sellers of RIL-RE on Wednesday, global long-only funds were the major buyers, according to market participants. Global ETFs generally do not hold partly paid shares.

Typically, REs trade at discount to the intrinsic value. However, RIL’s RE trades at a premium thanks to substantial interest from hedge funds and special situation funds. Market participants with long-term outlook will benefit from the staggered payment terms of the rights issue.

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