A New Beginning of Rights Entitlement Trading Through Exchange: A Case Of Reliance Industries Limited’s Right Issue

Abstract

The main purpose of the research paper is to understand and assess the largest ever right issue offered by Reliance Industries Limited in Indian history. Understanding the trading mechanism of the issue is also very important as the right entitlements of the issue will be traded on exchange for the first time in India. The study also focuses on exploring the opportunities arising from trading through exchange for existing and new investors. The paper shows the calculation of present value of the issue as payments are to be made in installment. Investment in Right issue is also compared with investment in existing shares of RIL. The research paper focuses on various strategies for existing and new investors to avail the opportunity given by company. The daily basis closing price for Reliance Industries Limited and Reliance Industries right entitlement are considered for study purpose. Data are collected from trading of right entitlement through National Stock Exchange from 20 May to 29 May, 2020. The paper help understand the different strategies that could have been executed to avail better return than market. The outcome of the study indicates the benefits of investing in rights for existing shareholders. It was also beneficial for new investors. Even after paying some premium the issue was beneficial for them against the current RIL share price. Studying all strategies, paper shows, investors had better opportunities of arbitrage to earn higher returns from RIL-RE.

Keywords: Reliance Industries Limited, Right Issue, Trading, Exchange

JEL Classification: G11, G12