RIL-RPL swap ratio set at 1:11
By Our Corporate Bureau | 04 Mar 2002
Mumbai: The boards of Reliance Industries Ltd (RIL), Indias top petrochemicals maker, and Reliance Petroleum Ltd (RPL), the countrys top private-sector refiner, have unanimously approved the merger of RPL with RIL to become the countrys first fully-integrated oil and petrochemicals major. The swap ratio is set at one RIL share for every 11 RPL shares.
The merger will take in retrospective effect from 1 April 2002. This is expected to lead to a 32 per cent increase in RILs equity - from Rs 1,053 crore to Rs 1,396 crore. The annualised EPS will increase to Rs 28.20 per share from Rs 26, based on financial results as announced by RIL and RPL for the first nine months of 2001-02. The two companies had a combined net profit of $707 million on sales of $9.1 billion for the first nine months of the financial year starting April 2001.
Speaking at a media conference, RIL managing director Anil Ambani said: The merged entity will have an enhanced financial strength and resources that will enable us to pursue future growth opportunities - both domestically and internationally. It is clearly a merger that creates a unique enterprise of a global scale.
The two companies have a combined weightage of 16.59 per cent of the Bombay sensitive index. According to analysts, improving valuations before raising equity from abroad for the groups telecom and power ventures are the main rationale behind the merger. Reliance may also bid for BPCL and HPCL, and it is one of the strong contenders for the IPCL takeover. The merger will improve the bidding prospects of the Reliance group.
An analyst with SBI Caps says the merged entity will now enjoy tax benefits that were enjoyed only by RPL. Besides, he says, both oil and petrochemical industries have a basic synergy - the raw material for both products is crude oil - and both the companies operate from Jamnagar, Gujarat.
Post-APM, RPL, as a standalone entity, will face problems to mobilise fund either from the domestic or international market. Funds are required for acquiring oil PSUs like BPCL and HPCL (in case they go for bidding) or for setting up its own petroleum products marketing outfits, says an analyst.
Reliance is building a fibre-optic network, linking 115 cities at a cost of Rs 250 billion as part of an aggressive telecom plan. It is also one of the bidders for Enrons stake in its $2.9 billion Indian power plant. RIL shares closed up 4.78 per cent at Rs 322.15 and Reliance Petroleum ended down 0.87 per cent at Rs 28.60, while the Bombay benchmark index ended up 3.27 per cent.