Reliance Industries share price up 72% since March lows, the record date for rights issue nears

Reliance Industries Ltd (RIL) share price is on an upward march and there seems to be no end to the surge. RIL shares after hitting a low of Rs 875 per share on March 23 have now jumped over 72% to trade at Rs 1,519 apiece. Although down 3% today, the V-shaped recovery path that the stock has charted for itself cannot be ignored. What makes Mukesh Ambani’s RIL even more attractive for retail investors is the firm belief that global investors have been showing in the stock, putting in over Rs 60,000 crore in its telecom arm Reliance Jio in just a few weeks’ time.

Luring investors with a stake in Reliance Jio, Ambani sold a 10% stake to Mark Zuckerberg’s Facebook and then got private equity firms Silver Lake Partners and Vistas Equity Partners on board soon after. However, that was not all that Ambani had in mind if reports are to be believed. According to Bloomberg, Saudi Wealth Fund could also be exploring the opportunity to buy a stake in Reliance Jio. US investment firm General Atlantic, that has funded the likes of Uber and Airbnb could also put in a mammoth investment in the company.

With the series of investments from global investors, Reliance will not just be getting more liquidity to tide over the current crisis that has seen the oil and gas business suffer, but will also inch closer to its zero-net-debt target by the end of this fiscal. Having a net debt of over Rs 1 lakh crore at the end of December 2019, Ambani has already secured a huge amount to trim that net debt and with the massive rights issue coming up the company is sitting comfortably.

The surge in share price yesterday was seen after RIL set May 14 as the record date for its massive Rs 53,000 crore rights issue. “Clearly the point is the slew of deals they have done. Rerating of the stock that is happening and has happened over time as well. People though core business will suffer and eventually, the company will suffer but post the deals they have enough cash flows. They also have other deals on the table so they will have cash during the current times. How the situation is right now, the companies with surplus liquidity will be preferred,” Abhimanyu Sofat Head of Research, IIFL Securities told Financial Express Online on Monday.

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