Demerger has not taken sheen off Reliance

The Reliance empire has virtually halved to settle the dispute between the two Ambani brothers, but RIL continues to be an attraction for investors, who flocked the Mukesh Ambani-controlled blue chip company as was evident from six crore shares changing hands in a single hour of special trading on Wednesday.

The new look RIL scrip, which evoked extremely good response from investors during the special trading on the Bombay Stock Exchange and the National Stock Exchange to discover price of the company after it hived off its power, telecom and finance businesses, has unlocked value for shareholders, besides providing them liquidity.

Shareholders would receive a bouquet of shares in four new companies, created as part of a settlement in the controlling Ambani family, giving them the option of retaining the inherited shares of the separated entities or selling them -- a win-win situation for investors.

At the same time, shareholders will continue to enjoy most value for their holdings in RIL, which would now function as a pure petroleum-to-petrochemicals company.

Market watchers were unanimous that shareholders would benefit from the demerger, as the risks would be lower on account of hiving off some unrelated business undertakings.

Reliance demerger: What should you do?

Shares of the company, whose corporate slogan is "Where Growth is a Way of Life," however, closed lower by 2.82 per cent at Rs 693.85 over the close of Rs 715.50 during the special trading this morning.

RIL's market capitalisation on BSE, which was Rs 1,29,000 crore (Rs 1290 billion) on the previous day, declined to Rs 96,553 crore (Rs 965.53 billion) on account of change in number of equities following the demerger, according to market sources.

The stock of RIL as a combined entity had zoomed 6.3 per cent higher at Rs 928.15 on Tuesday, virtually double of what it commanded (less than Rs 500) during troubled times -- the peak of the ownership battle between the Ambani brothers.

Differences between Mukesh and Anil over control of the group, which has interests in petroleum, petrochemicals, telecom, power and finance, spilled out in public in November 2004 and ended amicably in June last year.

For over nine months, the battle had engaged attention of the entire nation, where only an estimated 25 million of the over one billion people hold shares.

Accusations levelled by Anil against the Mukesh camp had eroded value of Reliance shares and at one point the share, which rose to a new intra-day high of Rs 937.50 on Tuesday, had dipped to less than Rs 500.

Even senior ministers had appealed to the brothers to settle their differences in the interest of the investors.

But Ambani family matriarch Kokilaben stepped in with a peace plan on June 18, 2005, and got her sons to accept it. Under the scheme, flagship RIL and IPCL went to Mukesh, while the group's telecom, power and finance businesses came under Anil.

The undivided Reliance Industries was the country's largest private sector company in all major financial parameters -- turnover {Rs 73,164 crore (Rs 731.64 billion)}, cash profits {Rs 12,087 crore (Rs 120.87 billion)}, net profit {Rs 7,572 (Rs 75.72 billion)} and net worth {Rs 40,403 crore (Rs 404.03 billion)}.

RIL scrip is a favourite with investors and 3.2 million shareholders are estimated to hold equity in the company.

The stock is also known as a trend-setter, among other things, for foraying into oil refining at a time when the space was still dominated by state-run players and is the first and only private Indian company to feature in the 2004 Fortune Global 500 list.

The group's $23 billion annual sales also accounted for 3.5 per cent of India's GDP.

The company, which entered the capital market in 1977 with a small market capitalisation of Rs 10 crore (Rs 100 million), has rewarded its original investors with compounded returns of 43 per cent per annum and kicked up the market capitalisation to Rs 1,29,000 crore (Rs 1290 billion) on Tuesday.

Anil thanks RIL board

In a statement issued to the media, Anil Ambani, chairman of the Anil Ambani group of companies said: "I am delighted that the demerger of Reliance Industries Limited has unlocked unprecedented value for more than 23 lakh (2.3 million) Reliance shareholders.

RIL's market capitalisation has increased over 50 per cent from June 2005 to date, outperforming the Sensex by nearly 20 per cent, and adding a record Rs 55,000 crore (Rs 550 billion) to shareholder wealth, in a short span of only seven months."

"RIL's standalone post-demerger market capitalisation is 15 per cent higher than its pre-demerger market capitalisation, and 23 lakh (2.3 million) Reliance shareholders will further benefit from the free shares they receive in the four Reliance-Anil Dhirubhai Ambani group companies, namely, Reliance Communications Ventures Limited, Reliance Energy Ventures Limited, Reliance Natural Resources Limited and Reliance Capital Ventures Limited," he said.

"I thank RIL and its board of directors for implementing the demerger process advocated by me, in the best interests of fairness, transparency and good governance, and to maximise value for 23 lakh Reliance shareholders, the true legacy of our founder chairman, Dhirubhai H Ambani.