Reliance Industries, which has kept 12.2 per cent of its crossholdings in Reliance Petroleum in trusts following their mega-merger last year, has decided not to offload the shares in the market for now.
The benefit of the share sale, valued at over Rs 8,000 crore (Rs 80 billion) at current prices, would have flowed into Reliance. At the time of the merger, Reliance said it would monetise the trust holdings.
Explaining the rationale behind the decision, Reliance vice chairman and managing director Anil Ambani said: "We are in no tearing hurry right now sell the shares."
Ambani indicated that Reliance is facing an upcycle in its petrochemicals business, while benefits from its investments in infocomm and the gas discoveries would flow in soon.
"Theoretically, if we can sell the shares later at Rs 700 each, why should we sell them at Rs 500 now?" he said.
There has been considerable speculation on the sale of these shares over the last few months, particularly following the high foreign institutional investor interest in the Reliance stock.
FII holdings in Reliance has now crossed 20 per cent, while GDR holders have another 6 per cent.
Commenting on the company's outlook, Ambani said: "We believe Reliance is facing a upcycle. All trends show we are headed for a petrochemicals upcycle in the next 24 months. Significant benefits will accrue from Reliance's investments in Reliance Infocomm, the huge gas discovery in the KG basin and the high margins we expect from the business, and strong volume growth in the existing businesses."
Reliance is not the only company in recent months to have put its cross-holdings following a merger in a trust instead of extinguishing the shares.
The reverse merger of ICICI into ICICI Bank (which were later extinguished), and Aditya Birla company Indo Gulf Corporation into Hindalco Industries, also saw the acquirer transfer the cross-holdings in a trust with the intent of monetising these holdings.