The Telegraph
Since 1st March, 1999
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Truce spotlight on IPCL shares
Reliance Cap to get cash from stake sale

Mumbai, June 26: Reliance Capital (RCL) is likely to be compensated by Reliance Industries for the transfer of its 50 per cent stake in Reliance Petroinvest, a company that controls 46 per cent in Indian Petrochemicals Corporation (IPCL).

IPCL is among the two listed firms under Mukesh Ambani, the other being flagship Reliance Industries. “It is unlikely that Anil Ambani has left this issue unresolved in the settlement. He must have ensured that Reliance Capital is compensated for the divestment of its stake in Reliance Petroinvest,” merchant banking sources said.

One of the first announcements made after the Reliance Capital board meeting on June 19 was to call for a fair deal in the sudden transfer of Reliance Petroinvest shares. Officials today declined comment on how soon that would happen.

The controversial share transfer by the previous RCL management is reported to have caused a loss of Rs 1,000 crore to the company. However, the firm is not believed to have shelled out a major sum to own Petroinvest shares. The acquisition was funded by RIL, but 50 per cent of the holding company’s stake was parked with RCL.

Immediately after the settlement of ownership disputes last week, Anil said he intended to invest Rs 2,000 crore (from his personal wealth) in Reliance Capital with the objective of turning it into a financial powerhouse. The decision was taken at the same RCL meeting where the IPCL share shuffle was raised. The event, the first Anil presided over as chairman, saw the resignations of several RIL-nominated members being accepted.

With the broad contours of ambitions and dreams for RCL being spelt out, it is expected that Anil would have pressed his claim for compensating RCL in the divestment of Reliance Petroinvest at the time of the settlement.

Reliance Petroinvest is one in the web of Reliance holding companies of which Reliance Capital owned 50 per cent at one point. This firm held 11.41 crore shares, equal to a 46 per cent stake in IPCL, whose stake was acquired by the Ambanis at Rs 231 apiece from the government.

Amitabh Jhunjhunwala, a close associate of Anil and Reliance Capital board member, had objected to the stake transfer. “The loss of fair value for Reliance Capital on this account is in the tune of Rs 1,000 crore. The sale of RCL’s strategic stake in IPCL at par value is indefensible,” he had said while objecting to the transaction at the RCL board meeting that considered the accounts. He was the sole representative of Anil at the event.

Commenting on the deal, executed in the last quarter of 2004-05, presumably, without prior approval of the board, Jhunjhunwala said: “Related party transaction is a breach of fiduciary responsibility towards RCL’s minority investors.” The remarks had even threatened to rock the process of settlement, finally announced on June 18.

Mukesh at AGM

Mukesh Ambani will address the 36th annual general meeting of IPCL on Monday, his first interaction with shareholders after the truce with brother Anil. He is expected to reveal plans on the petrochemicals major, especially his idea of investing Rs 30,000 crore in petro-product retail.

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