Reliance Industries' Rs 53,125 crore rights issue: Which investment banker is doing what?

Reliance Industries name sells in the stock market. Historically, whenever Reliance wanted to raise money, investors did not disappoint the conglomerate. In return, investors have been handsomely rewarded with dividends and capital appreciation over the years.

This time India's most valuable company with market capitalisation of Rs 9.20 lakh crore is entering the market with a huge Rs 53,125 crore rights issue. But these are not normal times. The broader index, the BSE Sensex, has fallen from 40,000 to 30,000 level in last two months.

The right issue is for existing investors and not for general public. Theoretically, this makes it easier for any well run company to sell the issue. But Reliance Industries, with interest in oil, retail and telecom, is not a company which will take things lightly.

They have lined up over a dozen investment bankers and banks to manage the rights issue. The big names are JM Financial, Kotak Mahindra Capital, Axis Capital, BNP Paribas, Citigroup Global Markets, DSP Merrill Lynch, Goldman Sachs (India) , HSBC Securities, ICICI Securities, IDFC Securities, JP Morgan Chase, Morgan Stanley , HDFC Bank and the SBI.

JM Financial has done critical tasks including capital structuring, following Sebi guidelines for letter of offer, filing with stock exchanges and Sebi, selecting bankers to the issues.  

There is a specific responsibility assigned to each investment banker. ICICI Securities has the responsibility of formulating the retail strategy. This includes all the work related with retail investors such as coordination of queries. ICICI Direct, which is a broking arm of ICICI Securities, was a pioneer in tapping investors for online trading with its three-in-one digital offering of broking, demat services and banking.

Similarly, the work on the domestic institutional marketing strategy has fallen on the shoulders of Kotak Mahindra Capital, which is a well known name with a goodwill amongst HNI (High New Worth Individuals) and institutional investors. Almost every mutual fund in the country has a shareholding in RIL. Insurance giant LIC has 6.01 per cent stake in the company. Kotak has also done the entire work on rights entitlement intimation to shareholders.  

Goldman Sachs (India) Securities Ltd has formulated the international marketing strategy. There are over 1,300 foreign portfolio investors holding 24 per cent stake in the company. The Govt of Singapore has more than 1 per cent stake.

IDFC Securities got the role of drafting and approval of all the publicity material including corporate advertisement, brochure , corporate films, etc. In addition, along with SBI, the country's largest private sector bank , HDFC Bank is banker to the issue. The private sector bank has been a challenger to top market cap companies like RIL and TCS in terms of market capitalisation.

Covid-19 outbreak and the lockdown have created an environment of uncertainty with stock markets wobbling around the world. Governments are pumping in trillions of dollars to save the economy from falling into recession. In India, the government has unveiled a stimulus package of Rs 20 lakh crore, which is a mix of liquidity from RBI and loans from banks, NBFCs and other financial institution to help the economy.  

The issue issue opens on a May 20 this week. "You need a clear market strategy as stock markets are wobbling globally and there is lot of uncertainty in the minds of investors," says one of the investment banker.

RIL's rights issue is part of a bigger plan to be zero debt company by the end of March 2021. The rights issue, which comes after a gap of nearly three decades, offers one new share for every 15 shares held in the company. The price fixed is Rs 1,257 per share. The current market price of RIL is trading at Rs 1,451 per share.

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