Merger to create mammoth refinery; RIL - RPL swap at 1:16

02 March 2009

The Mukesh Ambani-controlled companies, Reliance Industries Ltd (RIL) and Reliance Petroleum Ltd, were today merged into one entity, as anticipated. The boards have decided the swap ratio at 1:16, which means that RPL shareholders will get one RIL share for every 16 shares held in RPL. Reliance Industries has also decided to extinguish its treasury stock.

The merger will be effective from 1 April this year. The ratio is considered to be slightly in favour of RPL.

Commenting on the amalgamation, Reliance Industries chairman and managing director Ambani said, "The merger follows our enduring philosophy of creating shareholder value." He added the merger will be EPS accretive and that RIL will issue 6.92 crore shares to RPL shareholders.

The merger will give the benefit of combined operating profitability to the company, though tax benefits through depreciation would be minimal as the two units will maintain independent accounts.

The new entity, which will be the world's largest refining capacity at a single location and the fifth largest polypropelene manufacturer, will be better able to raise large funds, say industry experts.

Alok Agarwal, chief financial officer of RIL, speaking at a press conference, said the merger will unlock synergies in crude sourcing and product placement. He said the amalgamation will mitigate holding company discount.