Oil-telecom-to-retail major Reliance Industries will consider a proposal to issue equity shares to existing shareholders on rights basis on April 30.
Experts feel the rights issue after Facebook deal is a tool to build confidence among shareholders and create tremendous value for shareholders.
"It reflects promoter's unflinching faith in the medium to long term prospects of various businesses. Over the decades, like Dhirubhai Ambani, Mukeshbhai has always believed in creating tremendous value for minority shareholders," Ajay Bodke, CEO - PMS at Prabhudas Lilladher told Moneycontrol.
"With consumer focusing businesses like digital, telecom & retail achieving global scale, with global behemoths vying with each other to partner RIL; this is an apt opportunity for current shareholders to participate in the likely value unlocking of various businesses over the next couple of years," he said.
Shailendra Kumar, CIO at Narnolia Financial Services also feels the rights issue indicates a confidence-building among shareholders and shows that everything is positive.
Further, it shows that Reliance share price is not reflecting the actual fair value or the current share price is below the actual fair value, he said.
In the rights issue, only shareholders as on record date are allowed to participate.
Experts also feel that the proposal of rights issue is a part of balance sheet deleveraging strategy that the company announced in AGM last year.
"Reliance Industries continued its process of deleveraging balance sheet. So Facebook deal is already done, now they are waiting for Saudi Aramco deal, these all indicated that the company is in a position to deleverage balance sheet," Shailendra Kumar said.
In fact, it is in line with their strategy announced in last AGM in 2019 to look for strategic investors in telecom, oil, retail businesses etc, he added.
In other words, Reliance wants to keep its balance sheet light and aims to participate in the next business opportunity when the economy starts showing recovery, Shailendra feels.
Mukesh Ambani, Chairman and Managing Director of RIL, in his AGM speech in August last year, had said, "We have a very clear roadmap to becoming a zero net debt company within the next 18 months that is by March 31st, 2021."
"As we achieve our zero net-debt target, I assure you my dear shareholders that we will reward you abundantly through higher dividends, periodic bonus issues and other means, and at a more accelerated pace than any time in our history," he added.
Reliance Industries share price has rallied 62.5 percent since March 23's low, outperforming the Nifty50 that has gained over 20 percent in the same period.
On April 22, Reliance Industries, Jio Platforms and Facebook Inc signed binding agreements for an investment of Rs 43,574 crore by Facebook into Jio Platforms.
"This investment by Facebook values Jio Platforms at Rs 4.62 lakh crore pre-money enterprise value ($65.95 billion, assuming a conversion rate of Rs 70 to a US Dollar). Facebook’s investment will translate into a 9.99 percent equity stake in Jio Platforms on a fully diluted basis," company said in its BSE filing.
The country's most valued listed company on April 30 will also consider and approve the standalone and consolidated audited financial results for the quarter/year ended March 31, 2020; and recommend dividend on equity shares.
(Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.)
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