Trading in RIL rights entitlements ends, up 41% since May 20

Mumbai: Trading in the rights entitlements of Reliance Industries (RIL - RE) ended on Friday, with 114 million entitlements totalling more than a fourth of all REs changing hands in first such transactions in India involving these instruments.

This is the first time a rights entitlement was traded after the market regulator introduced it earlier this year to provide investors a mechanism to transparently discover the value of their REs.

Each RE entitles its owner to subscribe to one RIL partly-paid share by paying Rs 314.25 before June 3. Another 25% will be paid by the investor in May 2021 and the balance 50% i.e., Rs 628.50 per share, will be paid in November 2021 on-call by the company.

“This is a much-needed investor-friendly measure Sebi introduced mainly to discover the value of right entitlements and also to stop grey market trading,” said Deven Choksey, managing director, KR Choksey Investment Manager. “The other important feature is that shareholders who do not want to exercise their RE can renounce it by selling it on stock exchanges.”

The price of the RE, which was listed on May 20 at Rs 158, ended at Rs 223 on Friday, with a jump of nearly 41%. The volume weighted average price (VWAP) of REs stood at Rs 218.40 on Friday, marginally lower from the previous day, with 3.8 million REs changing hands.

The REs traded at an average premium of Rs 7.9 above their intrinsic value for the day. The intrinsic value, which is the difference between RIL stock price and rights issue price, stood at Rs 210 on Friday.

Reliance Industries shares ended marginally lower at Rs 1,470 on NSE. The company has come out with a rights issue in 1:15 ratio for the first time in three decades to raise about Rs 53,000 crore, mainly to pare debt.

Reliance shareholders as on 14 May were allotted one RE in their demat accounts for every 15 equity shares held by them. The RE was in the form of temporary demat securities. Those REs not renounced or exercised on or before Friday were lapsed. Retail investors were allowed to buy or sell the REs between May 20 and Friday on a trade-to-trade basis.