Reliance Industries, the country's most valuable company, is poised to offer over 10 per cent stake to financial and strategic investors following the merger of Indian Petrochemicals Corporation with itself. Going by the market price of around Rs 1,350 a share, the stake sale is expected to mobilise over Rs 20,000 crore (Rs 200 billion).
The shares to be put on the block comprise the current holding of RIL's associates in the company and the new shares that they will receive against their holdings in IPCL.
The chunk of the holding of RIL's associates is with Petroleum Trust, a special purpose vehicle created five years ago at the time of the merger of Reliance Petroleum with RIL. Petroleum Trust holds a 7.5 per cent stake in RIL.
RIL is, however, not creating any special purpose vehicle for parking the allotment of its associates' holding in IPCL. "The associates will hold the shares for the benefit of all the shareholders of RIL and monetise the economic value at an appropriate time in the future.
These shares could be offered to financial or strategic investors in domestic or international markets," a statement issued by the company said. The plan to monetise the holding of RIL's associates puts to rest the speculation on whether the company will extinguish these shares.
The proposed merger of IPCL is a part of the restructuring RIL had kicked off nearly a year ago. It began with bringing a handful of subsidiaries under IPCL last year.
Last fortnight, Chairman Mukesh Ambani announced subscription of preferential warrants for Rs 16,000-odd crore (Rs 160 billion).
RIL is also spinning off its overseas oil and gas projects into a separate subsidiary. "owing to the restructuring, RIL will be better equipped to pursue big overseas plans and monetise the benefit of an extended balance sheet. Its plan to offer stake to investors is aimed at reaping benefit from the restructuring," analysts said.
Post merger, the paid-up capital of RIL will go up to Rs 1,453.6 crore (Rs 14.54 billion) from the current Rs 1,393.5 crore (Rs 13.94 billion). So the promoters' stake, which is slated to go up by 4 per cent to 55 per cent after the warrants issue, will come down.
The Life Insurance Corporation holds 4.5 per cent, while the public shareholding is 48 per cent. RIL acquired 26 per cent stake in IPCL in 2002 and increased it by another 20 per cent through an open offer.