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Reliance pledges 20 mn BSES shares for IPCL open offer

Sambit Saha in Kolkata

Reliance has pledged 20 million shares of BSES --representing a 14.5 per cent stake in the power company--with ICICI Securities for the open offer of IPCL.

Reliance acquired IPCL in May by buying 26 per cent stake from the government. The open-offer document says the company has pledged 20 million shares of BSES with ICICI Securities, which is the manager to the open offer. When contacted, the Reliance spokesperson declined to comment on the issue.

The cash offer for 20 per cent voting capital of IPCL at Rs 231 per share, amounting to a net cash outflow of Rs 11.47 billion, is being made by Reliance Petroinvestments, a Reliance group company, along with Reliance Industries, Reliance Capital, Reliance Venture and Reliance Power Venture.

Reliance holds over 36 per cent stake in the power utility. However, it is not the identified promoter group of BSES. The pledging has been done in accordance with the Securities and Exchange Board of India guidelines on open offers. The pledging of shares is part of the statutory process followed in open offers.

The shares of BSES was procured by Reliance Petroinvestments through Reliance Power Venture in favour of ICICI Securities at a price of Rs 219.1 on May 24, 2002. This amounts to more than 25 per cent of the total consideration payable under the offer, assuming full acceptance. In fact, 20 million BSES shares at Rs 219.1 would amount to Rs 4.38 billion, which is 38 per cent of the total payable of Rs 11.47 billion.

ICICI Securities is empowered to sale the pledged stock if there is any deficit.

The offer documents say the manager to the offer is empowered to realize the value of such securities, by sale or otherwise, provided if there is any deficit on realisation of the value of the securities; the deficit, if any, shall be made good by the manager to the offer.

The offer document also says that ICICI Securities is satisfied about the ability of Reliance Petroinvestments to implement the offer in accordance with the regulations as firm arrangements for funds and money for payment through verifiable means are in place to fulfill the offer obligation. The auditor of Reliance Petroinvestments has also certified that the company has made adequate arrangements to meet the financial requirements of the offer obligations.

Reliance Petroinvestments has also made a cash deposit of Rs 115 million with ICICI Bank, being equal to 1 per cent of the total consideration payable under the offer and has marked a lien on the said cash deposit in favour of ICICI Securities and it is authorised to realise the value of the escrow in terms of the regulation.

The BSES stock closed at Rs 221.70 on the National Stock Exchange, up by 0.02 per cent over previous close. The IPCL stock moved up 1.61 per cent to close at Rs 154.65.

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