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History of Merger of Reliance Industries Limited

Harsh Thakrar 
on 19 September 2016

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1973

On 8th May the company was incorporated in Karnataka state as a public limited company under the name Mynylon Ltd. to manufacture synthetic blended yarns and fabrics, polyester filament yarn, polyester glass shells and colour TV picture tubes.

1975

On 28th June this company was converted into a public limited company.

On 11th February 1966 a company by name of Reliance Textiles Industries Pvt. Ltd was incorporated in Maharashtra. It established a synthetic fabrics mill in the same year at Naroda in Gujarat. 

On 1st July, Reliance Textile Industries Ltd was amalgamated with Mynylon Ltd.

1977

With effect from 11th March 1st the name of Mynylon Ltd was changed to Reliance Textiles Industries Ltd. The company manufactures synthetic blended yarns and fabrics polyester filament yarn polyester staple fibre chemicals and allied products colour TV glass shells and colour TV picture tubes. The Company's yarns are marketed under various brand names such as Texalit, Textron, Texlene, Poly dyed and polytwist. The company's fabrics are marketed under the brand name "VIMAL".

On November Dhirajlal H Ambani and Natvarlal H Ambani along with some other existing shareholders offered for sale at par to the public. 28,20,000 equity shares of the Company in order to get the shares of the company listed on the stock Exchange at Mumbai.

1979

During the year Sidhpur Mills Co. Ltd which has an installed capacity of 38,368 spindles and 490 looms was amalgamated with the company. In terms of the scheme of amalgamation, the company was to issue and allot for every one equity share of Rs. 100 each of Sidhpur, 2 equity shares of Rs.10 each and one bond of Rs.80 of the company.
 

The Company allotted a total of 1,12,000 No. of equity shares of Rs 10 each and 35,000 - 11% bonds of Rs 80 each to the shareholders of Sidhpur Mills.

1982

5,50,000 - 13.5% Pref. shares issued as Rights to equity shareholders. 19,20,000 equity shares issued to debenture holders (Series III) as per the terms of that issue. 815 No. of equity shares allotted out of the Rights issue of 1981.

1983

111,56,741 Bonus Equity shares issued in proportion 3:5. 64,00,000 No. of Equity shares of Rs 10 each issued in part conversion of debs. (IV series) on 30.9.1983. Of these, 24,00,000 shares issued as additional entitlement to debenture holders (iv series) on account of bonus issue.

1984

101,24,675 No. of Equity shares allotted conversion of non-convertible portion of debentures of Series I, II, III and IV of the total value of Rs 7231.92 lakhs in prop. 1:4. Equity shares of Rs 10 each for every Rs 100 of debentures (100,28,359 shares in 1984 and 96,316 shares in 1985). 53,33,333 No. of equity shares issued (prem. Rs 40 per share) on part conversion of `E' Series debentures as on 30.4.1985. Rate of dividend on 13.5% pref. shares increased to 15% effective from 16.5.1984.

1987

Three letters of intent were converted into industrial licenses. Subsequent to 30th June, all the industrial licenses were transferred to Reliance Petrochemicals, Ltd., a company incorporated as a subsidiary of the company.

689,65,480 No. of Equity shares allotted (prem. Rs 62.50 per shares) in conversion of `G' series debs. Out of which 660,30,100 shares allotted in respect of earlier conversion of debs. 300,00,000 Rights shares than issued (prem. Rs 50 per share; prop. 1:4) (all were taken up 14,60,000 additional shares were allotted to retain over-subscription for rights. Along with the Rights issue, 14,00,000 No. of Equity shares were offered to employees at a prem. off Rs 50 per share (under Employees Stock Option Scheme) but only 1,11,695 shares taken up. The balance 12,88,305 shares allowed to lapse.

1991

With effect from 1st March Reliance Petrochemicals Ltd. (RPL) was merged with RIL.The scheme of amalgamation had agreed a swap ratio of 1:10. Shareholders of RPL were issued one share of RIL for every ten shares of RPL. In a way, this was a backdoor premium issued by RIL.

1993

RPL, a Reliance group company, had come out with an IPO offering triple option convertible debentures (TOCD) to part finance its 9-million tonne green field refinery project at Jamnagar.

2000-01

In the above year, the turnover crossed Rs. 30,000 crore and a net profit of Rs. 1,674 crore.

In March 2002, Reliance Group announced merger of RPL with RIL with retrospective effect, i.e., from 1 April 2001. The process was completed with RIL allotting shares of RIL to shareholders of RPL in October 2002 in the ratio of 1:11.

In this case again, while RIL’s equity capital went up by only Rs. 343 crore, amalgamation added approximately Rs. 11,590 crore to its reserves. More importantly, RIL’s turnover in 2001-02, which would have been approximately Rs. 24,000 crore, shot up to Rs. 57,000 crore on account of RPL’s turnover of Rs. 33,000 crore, making it the largest private sector company in India!

RIL played the same rope trick again in 2006-07. In 2002-03, it had acquired 46 per cent stake in IPCL (Indian Petro Chemicals Limited) through its investment company Reliance Petro Investments Limited, at the cost of approximately 22,638 crore. In March 2007, RIL announced merger of IPCL into RIL with retrospective effect from 1 April 2006 and with the swap ratio of 1:5. This merger led to RIL equity capital going up by just 260 crore while its reserves shooting up by approximately 25,460 crore. It also added approximately 212,000-13,000 crore to the turnover of RIL in 2006-07.

On 2 March 2009, RIL and RPL (Reliance Petroleum Limited) boards announced the merger of RPL into RIL with a swap ratio of 16:1, i.e., one share of RIL for every sixteen shares of RPL. This is the third `RPL' of Reliance Group that like the first two mentioned above, is being merged with RIL. As we know, this RPL has set up the second refinery of Reliance Group close to its first refinery at Jamnagar. This new refinery went on stream in Dec 2008 and is being merged with RIL with retrospective effect from 1 April 2008.

At the time of merger announcement, RIL held 70.3 per cent stake in RPL's equity, while the western oil major Chevron held 5 per cent, rest being with the public. Chevron had an option to increase its stake to 29 per cent, subject to its signing crude supply and product off-take agreements. It is believed by some that the failure of RPL and Chevron to sign crude supply and product off-take agreements, as a consequence of which it was decided that RIL will buy Chevron's 5 per cent stake, was the trigger for merger (The Economic Times, 3 March 2009). Some others believe that RPL was expected to incur substantial losses in the first quarter of 2009 (also the first quarter of its operations) and the merger was being done to avoid declaring stand-alone results of RPL for the year ending 31 March 2009 (The Economic Times, 28 Feb 2009). However, in reality neither the merger nor its timing has come as a surprise. As can be seen from the earlier paragraphs, it is a part of the inorganic growth strategy followed by Reliance Group.

Let us see how RIL would look after this merger.

Post this merger, RIL is expected to be the largest company by market capitalization, ahead of the present largest, i.e., Oil and Natural Gas Corporation (ONGC). In terms of sales and net profits, it is expected to be second only to Indian Oil Corporation (IOC). Post merger, RIL is expected to have 19.7 per cent of the total turnover and 16.5 per cent of the total profitability of the 30 SENSEX companies (The Economic Times, 28 Feb 2009).

Post merger, RIL's turnover for 2009-2010 is estimated to be 22.60 lakh crore as against 2008-09 stand-alone estimate of Rs 1.60 lakh crore. Its net profit for 2009-2010 is estimated to be over 229,000 crore as against 2008-09 stand-alone estimate of over 220,700 crore. While its equity capital will go up by only 269 crore (4.4 per cent) from 21,574— 21,643 crore, immediately post merger, its net worth is estimated to shoot up to 21.05 lakh crore as of 31 March 2010 from the estimated stand-alone net worth of Z 84,000 crore as of 31 March 2009 (The Economic Times, 3 March 2009).

Thus,it is seen how 'merger' has been used very effectively as a growth strategy by the largest private sector company in India.

One must, however, understand that barring the merger of IPCL, all the other mergers into RIL mentioned above were of the group companies. Thus, while at RIL level the growth happened by inorganic route through mergers, at Reliance Group level it was still an organic growth.

Sources of Information –

  • www.ril.com
  • Past annual reports of RIL
  • The Economic Times, Feb 28, 2009
  • The Economic Times, March 3, 2009

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