"RIL & RPL MERGER"?

Before Reliance Petroleum Limited IPO

Date N0.of shares Issue Price Total

6-Dec-05 1 lakh 10 Rs 0.1 crs
30-Jan-06 4.3 crs 10 Rs 43.0 crs
25-Feb-06 269.56 crs 10 Rs 2695.6 crs
Total 270 crs Rs.2700.0 crs

So Pre IPO RPL has put Rs 2700 crs and almost all the money came in 25Feb 2006.

For IPO, RPL created fresh 180 crs of 10Rs face value shares where promoters will assign to 90 crs shares( with 3 years lock-in) and public will have 90 crs shares at the same price. Ipo price was 60 rs per share of face value 10.

So post IPO

Number of RPL shares increased to 450 crs from 270 crs pre-ipo.

Public put = 90*60= Rs 5400 crs

From 90 crs of promters locked in, they bought Sucker investor Chevron ( why sucker? Keep reading you will find out) for ¼ parts so 22.5 crs shares where placed to chevron at 60 rs per share

So Chevron put 22.5*60=1350cr

And RIL put = 67.5*60=4050 cr

So final figures emerges like this

RIL put total money 4050+2700= Rs 6750 crs ( that’s give them stake of 75%)
Public put = 5400 crs (that’s give them stake of 20%)
Chevron put =1350 crs (that’s give them stake of 5%)


So just by putting 6750 crs of promoters money and rest from public+ chevron money of 6750 crs. So for same money put in place promoters been holding 3 times more than ( 75%) than public+chevron (25%).

So using these equal amounts of public and promoters money they have developed & commissioned a complex oil refinery 100% export oriented with 7 years of tax holiday.

So RIL promoters used RPL to distribute execution and all other risk equally between them selves and public ( because each put same amount of money). Once fruit is ready( refinery is ready in all sense) then this merger announcement.
One other thing to note that RIL had sold 18.04 crore equity shares in open market in Nov 2007 and collected Rs 4000 crs plus. In actual their remaining investment was just 6750-4000= Rs 2750 crs, ( just 40% of public money)

One other point to note that, RIL shares not been falling much compare to market fall few last few months where as RPL shares been falling close to striking distance from its Oct 08 low. This will again give a favorable merger ratio towards RIL shareholders.

If we look at the past merger with reliance, reliance always cashes on merger and this time I don’t think it will be different.

Source: SAM (one of the most wise boarder in moneycontrol)