Mumbai, Dec. 20: Reliance Industries today announced an open offer of Rs 230.10 per share for an additional 20 per cent stake in BSES, a move that brings the Ambani group — with interests in petrochemicals, energy and telecom — closer to acquiring majority control in the power utility.
Reliance, together with its associate companies, is the single largest private sector shareholder in BSES, holding 43.43 per cent of BSES’ subscribed and fully paid up equity share capital.
The question being asked is whether the financial institutions will bite as they hold a big chunk of the BSES equity. Between themselves, they hold 36.6 per cent, with small shareholders—numbering about 1.4 lakh—holding 12.5 per cent.
They did not respond to the first open offer, which differs little from the current one. However, analysts agree that the FIs face a Hobson’s choice.
With Reliance steadily tightening its grip over BSES—first through an open offer in May 2000 that took its stake from 14.82 per cent to 26.68 per cent and then by open market purchases—all it needs is to bag 7 per cent more to take its stake to 51 per cent.
“The value of their (FIs) shareholding in BSES will get eroded if they don’t bite,” said an analyst tracking the company, adding that for RIL, this is part of the endgame to wrest control of BSES.
RIL said together with its wholly-owned subsidiary, Reliance Power Ventures Ltd. (RPVL), it has informed the Securities and Exchange Board of India (Sebi), the stock exchanges and BSES, of its intention to make an open offer for further acquisition of equity shares and/or voting rights of BSES, accompanied with change in control and management of BSES, in accordance with Sebi’s (Substantial Acquisition of Shares & Takeovers) Regulations, 1997.
“In pursuance of Reliance’s publicly stated objective of acquiring majority shareholding and management control of BSES, this open offer is being made, in a fair and transparent manner, in accordance with Sebi regulations,” the company said in a cryptic statement.
The open offer will be made for 20 per cent of the fully diluted equity share capital of BSES, i.e. 32,281,460 equity shares, at a price of Rs 230.10 per share. The total cost is estimated to be Rs 743 crore.
The investment will be financed internally from its own resources, RIL said.
The offer price has been arrived at in accordance with the regulations and represents a premium of over 7 per cent to the 26 week-average price under the regulations and a premium of nearly 3 per cent to the closing price of the BSES scrip today, the company said.
The offer will open on January 17 and close on February 15.
BSES, one of the leading power companies of the country, is engaged in the generation, transmission and distribution of electricity. It ranks among the top 20 listed private sector companies in terms of net profits, and among the top 30 on all other financial parameters, including assets, net worth, sales, gross profit, net profit and market capitalisation.
BSES is the largest power distribution company in the country and holds the exclusive licence for distribution of power in Mumbai, Delhi and Orissa.
Commenting on the open offer, Anil D. Ambani, vice-chairman and managing director, Reliance Industries, stated, “The open offer for acquisition of BSES reflects our commitment to the development of the power sector, a core infrastructural area, for acceleration of the country’s future economic growth. We believe this step is in the best interests of both companies, and will significantly contribute to enhancement of overall shareholder value for Reliance and BSES.”