|gaining in strength
Mukesh Ambani and other promoters will invest nearly Rs 17,000 crore in Reliance Industries to raise their stake to 54.53 per cent
RIL board has decided to issue
12 crore preferential warrants
convertible into equal number of
equity shares to the promoters
These warrants, of Rs 10 each,
translate into an equity infusion
of Rs 16,953.6 crore
The preferential issue will increase the paid-up capital to Rs 1,513 crore
Mumbai, Feb. 24: Mukesh Ambani and other promoters of Reliance Industries will invest nearly Rs 17,000 crore in the country’s largest private sector firm to raise their stake to 54.53 per cent, a move that will insulate it from any hostile takeover bid.
The RIL board, which met here today, decided to issue 12 crore preferential warrants convertible into equal number of equity shares to the promoters, who will increase their shareholding from 50.62 per cent to 54.53 per cent.
At yesterday’s closing stock price of Rs 1,412.8, these 12 crore warrants of Rs 10 each translate into an equity infusion of Rs 16,953.6 crore in the company.
The move, which puts Mukesh Ambani firmly in the saddle, is possibly the single largest equity infusion by promoters in an Indian company.
An RIL release issued after the board meeting, however, did not say at what price the warrants will be issued.
The 12-crore preferential issue will increase the paid-up capital of the company to Rs 1,513 crore from Rs 1,393 crore.
An amount equivalent to 10 per cent of the price will be paid on allotment of warrants and the remaining 90 per cent at the time of subscription of shares within a period of 18 months, the release said.
“The board’s approval to enhance the equity capital of the company through preferential issue of warrants to promoters demonstrates our commitment to value creation at Reliance,” chairman Mukesh Ambani was quoted as saying.
“The substantial enhancement of shareholders’ funds will take RIL to a higher growth platform by strengthening its capital structure. I am really excited about accelerating our investments in all our key businesses — oil & gas, refining, petrochemicals and retailing by both organic and inorganic growth initiatives,” Ambani added.
The promoters have been steadily increasing their stake in RIL since the past one year. For the quarter ended December 31, 2006, they increased their holding a little less than 1 per cent to 50.62 per cent from 49.92 per cent on a sequential basis.
While the issue will result in promoters’ holding in RIL going up, it is being done to largely fund the company’s exploration and production (E&P) activities.
At the same time, RIL is also setting up one of the largest integrated cracker and petrochemicals complex at a capital cost of $3 billion.
Reliance officials said though the price has not been fixed so far, it will be according to the regulations set by the Securities and Exchange Board of India (Sebi). Sebi norms stipulate that the price should be an average of 15 days from the “relevant date’’. This will be decided after RIL shareholders approve the proposal.
An analyst with a domestic brokerage said the preference issue is a positive move since it reflects the confidence of the management in RIL.
Reliance said it will build one of the largest integrated cracker and petrochemicals complex in the special economic zone (SEZ) at Jamnagar. This will be adjacent to the refinery that is being set up by its subsidiary, Reliance Petroleum Ltd (RPL). The complex will have a capacity of 2 million tonnes and the cracker will use refinery gases and other by-products as feedstock to manufacture ethylene, propylene and and speciality derivatives.
It will be built at a capital cost of $3 billion and is expected to go on stream by 2010-11.
According to RIL, this integration with the refinery will place the cracker complex on a par with the most efficient producers of olefins and derivatives in the world, including those in West Asia and it will enable the company to achieve one of the most competitive cost positions.
At the board meeting today, RIL also decided to appoint R.A. Mashelkar as an independent director on its board. Mashelkar is the president of the Indian National Science Academy (INSA) at present.