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Ambanis keep BSES at armís length

Mumbai, April 24: Twelve days ó thatís how long BSESí umbilical chord twined it to Reliance Industries.

In that time, one of the largest private power companies in the country went from being a subsidiary of Reliance to a standalone entity within the group. A fleeting status shift for the utility that peddles power in Mumbai and earned Rs 2,777 crore in 2002-03.

It all started when Reliance Industries, along with its 100 per cent subsidiaries, Reliance Power Ventures and Reliance Industrial Investments, made a cash offer to the investors of BSES to purchase up to 3.22 crore shares at a price of Rs 230.10 each. That represented 20 per cent of the fully diluted voting capital. The deal done, BSES became a Reliance arm from March 17.

Then, Reliance Power Ventures transferred 5.66 per cent of BSESís paid-up equity to Reliance Capital, a company in which Reliance Industries holds 46.2 per cent. The stake shuffle left Reliance with 49.5 per cent in BSES, which ceased to be a subsidiary from March 29.

There is no word on why the shares were moved around, but analysts say an infrastructure company like BSES has a voracious appetite for growth funds. Much of this money will have to be locked up for a long time and might not yield good returns in the short term.

If BSES continued as a subsidiary, its accounts would have to be consolidated with those of Reliance Industries ó not a comfortable proposition for the Ambanis who know just how knotty BSESí finances are.

There are more loose ends. BSES will have to take into account losses pouring in from its power distribution business in Orissa. When Reliance managing director Anil Ambani was asked about this at the press conference called to announce the companyís results on Wednesday, he did not have figures. He said the quantum of losses that could be suffered by all agencies in Orissaís power distribution business ó BSES is one of them ó was uncertain at this point.

BSES itself reported a decline of 42 per cent in net profits at Rs 162 crore for 2002-03 against Rs 281 crore in the year before. The slide was blamed on a flawed billing model.

Early this week, Ambani was named BSES chairman and managing director in a board reshuffle that saw former army chief V. P. Malik join as an independent director. Ambani was the non-executive chairman earlier.

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