Ahead of the carving out of four new entities from Mukesh Ambani-controlled Reliance Industries Ltd to give effect to the settlement worked out between the Ambani brothers, the flagship company on Monday advised its millions of investors on the method of computation of its share value under the new dispensation for the purpose of taxation.
Two days before the special trading session for finding value of its shares post demerger of communications, energy and capital ventures from it, the company advised that 52 per cent of the cost of acquisition of the combined entity should be apportioned to post-demerger RIL.
This in other words would mean that the RIL's value would be considered equal to just a little over half of its present
worth after the four new entities come into existence -- the record date for which is set at January 25.
Terming the communication as its 'public notice' in the interest of investors, the communication suggested that over 38.7 per cent of the pre-demerger cost of RIL share be aportioned to Reliance Communication Ventures, besides another 9.3 per cent for the other three entities that have been given to Anil Ambani as part of the ownership settlement.
"The public notice is issued to inform the shareholders the method of calculation of the cost of acquisition and date of acquisition of the resulting companies' shares as also of the company shares as per the provisions of the Income Tax Act, 1961 and is based on experts' opinion," RIL said in its communication to the Bombay Stock Exchange.
Going by the current price at Rs 873.1 a share, the cost of acquisition of 100 per cent of RIL shares, which now stands at about Rs 121,667 crore (Rs 1,216.67 billion), will come down to about Rs 63,000 crore (Rs 630 billion) in the post de-merger scenario, going by the computation method suggested by RIL.
Likewise, the cost of Reliance Communication Ventures Ltd, an SPV created for the company's investment in Reliance Infocomm, would be about Rs 48,000 crore (Rs 480 billion).
As per the computation, the cost of acquisition of RIL shares would be in the ratio of 52 per cent for Reliance Industries, 38.7 per cent for Reliance Communication Ventures Limited, 7.3 per cent for Reliance Energy Ventures Ltd, 1.3 per cent for Reliance Capital and 0.7 per cent for Reliance Natural Resources Ltd.
Reliance Energy and Reliance Natural Resources ventures Ltd would be merged with Anil Ambani-controlled Reliance Energy and Reliance Capital Ventures Limited with Reliance Capital, also controlled by the younger Ambani.
In terms of Scheme of Arrangement, the assets and liabilities relatable to the demerged undertakings have been transferred to the resulting companies at values as appearing in the books of accounts of the company as on the close of business on August 31, 2005.
The book value of net assets transferred in Reliance Communications stand at Rs 15,389 crore (Rs 153.89 billion) and 122.31 crore (1.223 billion) shares would be issued with a face value of Rs 5.
Similarly in case of Reliance Energy Ventures Limited Book Value of net assets transferred is Rs 2,921 crore (Rs 29.21 billion) for 122.31 crore shares of face value of Rs 10 each.
Likewise in the case of Reliance Capital Ventures Limited, the Book Value of net assets transferred stands at Rs 512 crore (Rs 5.12 billion) for 122.31 crore shares of face value of Rs 10 each share. A sum of Rs 297 crore (Rs 2.97 billion) has been transferred towards Reliance Natural Resources for 122.31 crore shares of face value of Rs 5 each, RIL communication said.
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