The Hindu Business Line : RIL to demerge power, finance, telecom — Investors to get shares of separated units

RELIANCE Industries Ltd (RIL) has decided to demerge its holdings in Reliance Capital, Reliance Energy and Reliance Infocomm into separate entities for facilitating their transfer into the Anil Ambani-led ADA Enterprises fold.

This was announced at its annual general meeting held here on Wednesday, the first since the ownership dispute between the two Ambani brothers became public.

The proposed business reorganisation would lead to significant unlocking of shareholder value, said Mr Mukesh Ambani, Chairman of Reliance Industries.

Immediately after the AGM, the Chairman of the "new Reliance group," Mr Anil Ambani, separately announced the terms by which 23 lakh shareholders of Reliance Industries will enter his ADA Enterprises fold.

Every 100 shares in Reliance Industries Ltd will fetch shareholders five shares of Reliance Capital Services, seven shares of Reliance Energy Ltd, 100 shares of Global Fuel Management Services Ltd and 100 shares of Reliance Communications Ventures Ltd.

All this, of course, while keeping their shareholding in Reliance Industries Ltd.

These stock ratios are not based on any valuation, but rather, on "the fairness principle, pricing and par value," said Mr Ambani, at a press conference on Wednesday.

RIL has appointed Crisil, Deloitte, Haskins & Sells, Amarchand Mangaldas & Suresh A. Shroff & Co and JM Morgan Stanley to assist in working out the details of the demerger. Once the detailed proposal is approved by the RIL board, the shareholders approval will be sought as part of a court-determined process.

While Reliance Capital (RCS) and Reliance Energy (REL) are listed companies, Global Fuel Management Services (GFMS) and Reliance Communications Ventures Ltd (RCVL) will be newly set up, both to be listed before March 31, 2006, he said.

GFMS will be a holding company that will take care of contract and supply of natural gas from RIL for the requirements of REL's power plants with a total planned capacity of 10,000 MW; this company will be set up separately in the interests of transparency, he said.

RCVL will be the holding company for the ADA group's communications companies that will include Reliance Infocomm (RIC, CDMA player), Reliance Telecom (the GSM player), Reliance Communications Infrastructure, and FLAG Telecom.

Valuation has been done only with respect to Reliance Infocomm where each share was valued at Rs 105 , but allotted at Rs 32 each (in the interest of shareholders) when the REL exercised the option to convert its Rs 8,100 crore of equity investment recently, said Mr Ambani.

With the shares allotted and the two new holding companies listed, the 23-lakh shareholders from RIL will get the benefit of liquidity in all the companies of ADA Enterprises, he said.

As far as the GDR shareholders of RIL are concerned, they will get GDRs in the listed companies, RCS and REL.

As far as the unlisted GFMS and RCVL go, their equity will have to be worked out.

"We are trying to find out what is the best investor-friendly way to give equity to them," said Mr Ambani.

The intermediate stage for the transfer of RIL shares in RCS and REL would also involve the setting up of two special purpose vehicles, which will be ultimately merged into the respective companies, he said.

All this will be subject to shareholders' approval at EGMs which will have to be called for the purpose, court approvals and the like, pointed out Mr Ambani. Historically these approvals take 90 to 120 days.

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