DEBT MANAGEMENT
Reliance approached the investing public directly to finance its growth. Mobilsing funds directly from the public was a departure from the prevailing practice among Indian businesses at that time. RIL preferred to raise capital directly from public to the funds mobilized from public financial institutions. After the initial public offering of equity in 1977, RIL approached the public again in 1979, this time with an offer of partially convertible debentures to finance setting up s worsted spinning plant. Since then RIL employed this instrument with great success in mobilising funds from the public and it became a major source of financing from the capital markets in India. The 1979 issue was quickly followed with issues of partially convertible debentures in 1980 (for modernizing its textile facilities), 1981 (to finance its foray into the manufacture of PFY) and a record (then) Rs 500 mn offering in 1982 to further modernize its textile facilities.
In 1982, Dhirubhai moved to the market reportedly on behalf of what later to be referred to as ‘ Crocodiles and Fiascos’ and bought up all the shares that were being sold and demanded the delivery. The resultant panic buying by the bears lead to an over 40% rise in RIL’s equity shares.
The image of Dhirubhai got further reinforced in 1983 RIL, in an unprecedented move, offered to convert non convertible portion of the debentures issued between 1979 and 1982 into equity. It offered to exchange every Rs. 100 of debt for 1.2 equity shares of Rs. 10 face value, share being quoted at Rs. 115 on stock market. In a single stroke the company had not only eliminated the debt burden, it had also increased its further fund raising capacity significantly. Within a year of the extinguishments of debt, RIL mobilized over Rs. 3.5 bn of fresh funds from the markets.
Reliance approached the investing public directly to finance its growth. Mobilsing funds directly from the public was a departure from the prevailing practice among Indian businesses at that time. RIL preferred to raise capital directly from public to the funds mobilized from public financial institutions. After the initial public offering of equity in 1977, RIL approached the public again in 1979, this time with an offer of partially convertible debentures to finance setting up s worsted spinning plant. Since then RIL employed this instrument with great success in mobilising funds from the public and it became a major source of financing from the capital markets in India. The 1979 issue was quickly followed with issues of partially convertible debentures in 1980 (for modernizing its textile facilities), 1981 (to finance its foray into the manufacture of PFY) and a record (then) Rs 500 mn offering in 1982 to further modernize its textile facilities.
In 1982, Dhirubhai moved to the market reportedly on behalf of what later to be referred to as ‘ Crocodiles and Fiascos’ and bought up all the shares that were being sold and demanded the delivery. The resultant panic buying by the bears lead to an over 40% rise in RIL’s equity shares.
The image of Dhirubhai got further reinforced in 1983 RIL, in an unprecedented move, offered to convert non convertible portion of the debentures issued between 1979 and 1982 into equity. It offered to exchange every Rs. 100 of debt for 1.2 equity shares of Rs. 10 face value, share being quoted at Rs. 115 on stock market. In a single stroke the company had not only eliminated the debt burden, it had also increased its further fund raising capacity significantly. Within a year of the extinguishments of debt, RIL mobilized over Rs. 3.5 bn of fresh funds from the markets.