The Hindu Business Line : 4.7% RIL equity: Who will derive benefits?

UNKNOWN owners of four associate companies of Reliance Industries Ltd (RIL) would continue to enjoy the benefits, including voting power, of over 6.5 crore RIL shares until loans the companies borrowed from the petrochemical major are converted to equity.

The private companies, Reliance Polyolefins, Reliance Aromatics and Petrochemicals, Reliance Energy and Project Development and Reliance Chemicals, together hold 4.7 per cent of RIL's equity, given to them in exchange for Reliance Petroleum (RPL) shares when it was merged with RIL.

These companies had taken long-term, optionally convertible loans of Rs 2,255 crore from the RIL subsidiary, Reliance Ventures, to buy RPL shares. Last year, the interest-bearing loans were converted to zero-interest bonds.

If converted, RIL will become 99.99-per cent owner of the four companies, but the option rests solely with the borrowers. Currently, the four are owned by unnamed investment companies and managed by some RIL employees.

The current situation appears to be that RIL shareholders are seemingly potential beneficiaries of the 4.7 per cent equity stake but the power to claim that benefit is with some unknown entities who are referred as persons acting in concert with RIL promoters.

A controversy over the shares erupted on Tuesday when a group of people identified closely with the RIL Vice-Chairman and Managing Director, Mr Anil Ambani, alleged that the loan agreements were changed without the knowledge of the RIL board.

The allegations received wide publicity because over the past few months Mr Anil Ambani and his elder brother, Mr Mukesh Ambani, have been trading punches through the media in a tussle over ownership of RIL, which pivots a Rs 99,000-crore energy and petrochemicals empire.

They say that Mr Anil had raised the issue with the RIL Chairman and Managing Director, Mr Mukesh Ambani, and with others within the company over the past several months.

A source, believed to be close to Mr Mukesh, said the RIL Chairman had told the Vice-Chairman as late as in April 2004 that his endeavour was to maximise the benefits flowing from these shares to the shareholders of RIL.

The source could not say whether Mr Anil had raised the issue at any previous board meetings, but was certain he did not when the board met on December 27 to consider a share buyback.

Persons close to Mr Anil on Tuesday told mediapersons in private that Mr Mukesh and his associates were trying to hijack the 4.7 per cent equity stake.

In an official release on Wednesday, RIL said it was baseless to allege that there has been any intention of the management of RIL to divert the benefits of these assets to the promoters.

Rubbishing the unsigned allegations as canards, the RIL statement said: "Economic benefits of RIL shares held by these four companies have always been for the benefit of RIL's shareholders, and remains so. This fact has been reiterated by RIL a number of times."

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