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RIL reality check on Infocomm

Mumbai, June 28: Reliance Industries, the flagship company of the Rs 1,00,000-crore Reliance group, today initiated moves to tidy up its shareholding in Reliance Infocomm as a precursor to a demerger following the settlement between the warring Ambani brothers.

The same exercise will be done in the other group companies like Reliance Energy and Reliance Capital in favour of Anil Dhirubhai Ambani Enterprises (ADAE).

The RIL board approved a plan to convert the preference shares of Reliance Infocomm into fully paid-up equity shares of the face value of Re 1 each at a price of Rs 32 per equity share.

The conversion valued the Infocomm venture at Rs 22,528 crore, which is much lower than earlier touted estimates that put a value between Rs 45,000 crore and Rs 55,000 crore.

The current exercise also values Reliance Infocomm ' which is now part of Anil Ambaniís empire ' at considerably less than Bharti Tele-Ventures, which has a market capitalisation of Rs 44,000 crore. Both the telecom companies have almost the same number of subscribers at around 11 million each.

The RIL board, which met twice in a space of 10 days, today overcame one of biggest hurdles to a proposed demerger by converting the loan extended to Reliance Infocomm of Rs 8,100 crore represented by 162 crore preference shares into equity shares.

The conversion of the preference shares (including the interest component) will lead to the allocation of 287.76 crore fully-paid up equity shares of Reliance Infocomm with a face value of one rupee each to Reliance Industries, thereby raising the latterís stake in the telecom venture to 65.9 per cent from 45 per cent earlier. This stake held by Reliance Industries is valued at Rs 9,208.27 crore.

After the conversion, the total equity of Reliance Infocomm will rise to Rs 704 crore, giving the telecom company a fair value of Rs 22,528 crore.

Todayís move is a prelude to the final demerger of companies controlled by each of the two brothers, sources said. The board of Reliance Industries was urgently summoned today to consider the demerger issues arising out of the June 18 settlement.

The preference shares of Reliance Infocomm was the main stumbling block to the proposed de-merger. Some analysts had voiced misgivings earlier saying that the loan should now be repaid. By virtue of this exercise, they have removed that major stumbling block.

The move will see the stake of Mukesh Ambani and his associates in Reliance Infocomm going down from 55 per cent to 34 per cent. But this will be transferred to ADAE when the demerger takes place.

Sources said the converted value also includes the interest for two years on investment made by RIL in Infocomm and would substantially boost the value for RIL shareholders.

In another move, RIL had informed the stock exchanges that it would buy 6.97 per cent equity of Reliance Energy from its subsidiaries at a rate of Rs 157.74 per share as against the current market price of Rs 625.15 a share.

The board meeting, which began in the afternoon, went on for one-and-half hours as the board members deliberated on the Infocomm conversion and other strategies to facilitate the demerger of the companies headed by Anil.

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