RIL PP - Blood Sucker of retail investors

Reliance Industries issued Rights Shares at Rs. 1,257  per share in June 2020. As RIL called for only 25% (Rs. 314.25 per share) till this date, on such rights, partly paid (PP) shares got listed, which has mesmerised retail investors, thanks to Media and Experts, who strongly advised them to buy it, either by exiting from RIL fully paid up or by buying them from open market, as much as they can. This reminds us of throw out the baby with the bathwater.

RIL share touched life high of Rs. 2,370 on 16th Sep 2020, so as RIL PP at Rs. 1,470. Now RIL share price  fell to Rs. 1,842 (a fall of 22% from life high), RIL PP also fell to Rs. 969 (a fall of 34%) , thus eroding capital of RIL PP faster.  RIL PP holder has to pay Rs. 314.25 in May 2021 and Rs. 628.50 in November 2021, aggregating Rs. 942.75 in the next 10 months. This gives an effective cost of Rs. 1,912 per share of RIL, to a RIL PP holder. Means he is paying a premium of Rs. 70, which eventually works out to 12 % interest per annum. RIL share in February series of F&O rules at Rs. 1,845, at a premium of Rs. 3 only. This translates into an interest rate of 2% per annum. Means, compulsive HNIs and FII investors in RIL  are seen dumping RIL PP and building long position in Future, as  also, writing CE, (to give an example, writing 1,900 Feb CE at Rs. 63) .

RIL PP shareholders are seen cheated now, with anger seen being vented out by them on the vested interest Media and few experts there, as many of these holders have no funds available with them to pay Call  Money in May and November. Many of them are saying that if you wish to salvage Rs. 943 (present PP approx rate), you have to risk with an equal amount of Rs. 943 per share and possibly by November RIL may trade at Rs. 1,500 fully paid up.

Poor RIL PP shareholders are on a crossroads, neither can swallow it nor vomit it.