Reliance Industries Ltd. is considering its amalgamation with Reliance Petroleum Ltd. The board has decided to meet on 2nd March for this purpose. The merger will give retrospective effect from 1st April 2001.
Reliance Industries Ltd. will issue about 34 crore additional equity shares of market value of approximately Rs 11,000 crore. Few months earlier, RIL had sold 4% stake in RPL which decreased the stake holding to 71% from 75%.
The net worth of Reliance Petroleum is valued around 20000 crores. This merger will lead to increase in profits of Reliance Industries. The equity shareholding of the promoters in RIL would come down from the current 44% to 34%.
Reliance Industries Ltd. expects to increase the cost efficiency as it will bring down the costs of Inter-company transfers & operational costs which will further lead to improving the financial efficiency.
We can expect the conversion of the holdings at around 1 share of Reliance Industries for every 20 shares of Reliance Petroleum. As the operational costs of RIL will decrease substantially, this merger will be a good news for Reliance Industries share holders as the profits are tend to increase after the decrease in operational costs.
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