Mumbai: Brokerage firm Morgan Stanley is of the view that a rights issue by Reliance Industries Ltd may help the company to not only boost its earnings per share but also substantially reduce its debt, including liabilities.
On Monday, RIL had announced its board will, on Thursday, consider earnings for Jan-Mar and 2019-20 (Apr-Mar), as well as a rights issue. The company did not indicate the size of the rights issue.
Morgan Stanley was surprised by the announcement of the rights issue, given that the company is in the process of deleveraging, through a recent deal announcement and reduction in capital expenditure.
The brokerage believes the oil-to-telecom conglomerate may consider a rights issue of 2-12% of the current equity base, which may add as much as 0.1-2.6% to the company’s earnings per share and help cut its debt of $41 bln by 4.7-34.0%.