NEW DELHI: Reliance Industries’ Board of Directors on Thursday approved the company’s first Rights Issue in nearly three decades in an effort to raise up to Rs 53,125 crore in additional capital. The move comes at a time when the oil-to-retail conglomerate has taken a beating from the Covid-19 pandemic and announced pay cuts for its hydrocarbons unit.
The issue price has been set at Rs 1,257 per fully paid-up equity share and eligible shareholders are being offered 1 equity share for every 15 they hold. RIL also said that the Mukesh Ambani-led promoter group will participate to the full extent of their rights entitlement in the issue.RIL scrip had closed the day at Rs 1,467.05 on BSE. Analysts say the Rs 53,125 crore RIL hopes to raise will only help mitigate a challenging business environment.
According to financial statements released on Thursday, RIL’s consolidated net profit fell 37.2 per cent year-on-year during the fourth quarter of FY20. Demand destruction wrought by the pandemic in global oil markets and the resultant plunge in prices have taken a chunk out of the cash cow hydrocarbons business, resulting in an exceptional loss of Rs 4,245 crore and bringing down consolidated Q4 net profit to Rs 6,546 crore from Rs 10,427 crore last year. While its consumer businesses — Digital Services and Retail — have performed far better than hydrocarbon units, they accounted for only 9.7 per cent and 20 per cent of its gross revenues respectively during the quarter.
Digital services, including Reliance Jio Infocomm, saw EBITDA rising 43 per cent YoY. In fact, Jio alone saw 177 per cent surge in net profit at Rs 2,331 crore.The retail business also saw substantial growth, segment EBITDA rising 33 per cent YoY to Rs 2,556 crore. But, non-grocery retail units have been hit hard by the nationwide lockdown. “Since the lockdown was imposed only late March, the full impact on retail will be reflected only during the current quarter,” said an analyst.
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With forecasts seeing little improvement in oil demand in the short term, the company’s hydrocarbon earnings — contributing over 61 per cent of gross revenues — are likely to remain depressed.
Meanwhile, RIL announced 10 per cent pay cut for hydrocarbon segment employees earning over Rs 15 lakh per annum, and deferred cash bonuses and performance-linked incentives. The Board has also taken pay cuts ranging from 30-50 per cent, while chairman Mukesh Ambani will forego his salary, said executive director Hital R Meswani in a letter to employees.