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to manufacture synthetic blended yarns and fabrics, polyester filament yarn, polyester glass shells and colour television picture tubes. In February 1975, a company by the name Reliance Textile Industries Limited (RTIL) was incorporated in Maharashtra. On 1st July, 1975 RTIL was merged with Mynylon Limited and name of Mynylon was changed to Reliance Textile Industries Limited (RTIL). Thus, one can see that the birth of today s RIL took place through a merger. In October 1977, the promoters (Ambanis) made an offer for sale of 2820000 equity shares of Rs. 10/- each at par and consequently the company was listed on the Bombay Stock Exchange in January 1978. In June 1985 the name of the company was again changed to Reliance Industries Limited (RIL). Till 1988, RIL mainly followed the organic growth strategy by setting up plants in its Patalganga Complex. Polyester filament yarn (PFY) phase I was commissioned in 1982, followed by phase II in 1985. In 1986 it commissioned polyester staple fibre (PSF) and purified terephthalic acid (PTA) plants in the same complex. This was followed by commissioning of linear alkyl benzene (LAB) plant in 1987 and paraxylene (PX) plant in 1988 in the same complex. Simultaneously, in 1987, Reliance Group had incorporated a company named Reliance Petrochemicals Limited (RPL) to develop the first phase of its Hazira Complex by setting up plants to manufacture ethylene oxide (EO), mono ethylene glycol (MEG), vinyl chloride monomer (VCM), poly vinyl chloride (PVC) and high density polyethylene (HDPE). This company came out with a public issue of approx. 74.93 crore equity shares of Rs. 10/- face value at par to raise Rs.749. 28 crore to part finance this phase I of Hazira Complex. After the first phase was commissioned in 1991, RPL was merged with RIL. The merger, which happened on 1st March 1992, had a swap ratio of 1:10. Shareholders of RPL were issued, for every 10 shares of RPL, one share of RIL. In a way, this was a backdoor premium issue by RIL. In 1992, Reliance Group had come out with a simultaneous issue of equity shares at par (face value Rs. 10/-) and optionally convertible debentures (OCD) convertible at the price of Rs. 50/- per share for each of its twins i.e. Reliance Polyethylene Limited (RPEL) and Reliance Polypropylene Limited (RPPL). These companies, which were popularly known as Illu and Pillu , respectively, in the stock market those days, had been promoted to develop second phase of Hazira Complex by setting up plants to manufacture polyethylene and polypropylene respectively. These issues had received huge response from the public. Prior to these issues, the promoters had allotted hefty chunk of equity at par to themselves. Though the promoters participated in the OCD issue, it was to much lesser extent than public. Thus the cost of one equity share of RPEL worked out to Rs. 14.31 to promoters whereas the same was Rs. 34.13 to the public. In case of RPPL, these numbers were respectively Rs. 16.61 and Rs. 33.61. In financial year 1994-95, these companies were merged with RIL with a swap ratio of 1:4 in case of RPEL
and 3:10 in case of RPPL. As a consequence, the equity capital of RIL went up only by approx. Rs. 99 crore but with a whopping addition of approx. Rs. 700 crore to its reserves. Public shareholders of RPEL and RPPL got RIL shares at Rs. 136.52 and Rs. 112.03 respectively, whereas the promoters got them at Rs. 57.24 and Rs. 55.40 respectively. (The share price of RIL was in the range of Rs. 350-400 at that time). In 1993, Reliance Petroleum Limited (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
Rs.7% of the total turnover and 16. its net . as a consequence of which it was decided that RIL will buy Chevron s 5 percent stake.60 lac crores as against 2008-09 standalone estimate of Rs. In this case again.e. 2009 (Economic Times dated 28th Feb 2009). rest being with the public.60 lac crores. 862 crores. Rs. ahead of RIL. The process was completed with RIL allotting shares of RIL to shareholders of RPL in October 2002 in the ratio of 1:11. on 2nd March. Post this merger. RIL announced IPCL s merger with itself retrospectively from 1st April 2006 and with the swap ratio of 1:5. 60 crores while its reserves shooting up by approx. ONGC. It posted a sterling performance in the first full year of operations i. which would have been approx. 12000 to 13000 crore to the turnover of RIL in 2006. Some others believe that RPL was expected to incur substantial losses in the first quarter of 2009 (the first quarter of its operations also) and the merger was being done to avoid declaring standalone results of RPL for the year ending 31st March. Rs. making it the largest private sector company in India. 2. it is expected to be second only to Indian Oil Corporation (IOC). In March 2002.3 percent stake in RPL s equity. In terms of sales and net profits. More importantly.e. 2000-01 with the turnover crossing Rs. that like the first two mentioned above. 2638 crore. 30000 crore and net profit of Rs. Reliance Group announced merger of RPL with RIL with retrospective effect from 1st April 2001. 57000 crore on account of RPL s turnover of Rs.e. it had acquired 46% stake in IPCL through its investment company Reliance Petro Investments Limited at the cost of approx. In 2002-03. 33117 crore and net profit of Rs.refinery project at Jamnagar. 24000 crore. This new refinery went on stream in Dec 2008 and is being merged with RIL with retrospective effect from 1st April 2008. This is the third RPL of Reliance Group. RIL played the same rope trick again in 2006-07. However. In March 2007. As can be seen from the earlier paragraphs. This merger led to RIL equity capital going up by just Rs. While it is believed by some that the failure of RPL and Chevron to sign crude supply and product off-take agreements. At the time of merger announcement RIL held 70. Chevron had an option to increase its stake to 29 percent subject to Chevron signing crude supply and product off-take agreements. 5460 crores. 1674 crores. RIL and RPL (Reliance Petroleum Limited) boards announced the merger of RPL into RIL with a swap ratio of 16:1 i. shot up to Rs. 1 share of RIL for every 16 shares of RPL. Rs.Let us see how RIL would look post this merger. Post merger RIL s turnoverfor 2009-10 is estimated to be Rs. Post merger. RIL is expected to be largest company by market capitalization. 1. Hence the project got delayed and was commissioned in the financial year 1999-00. in reality neither the merger nor its timing is any surprise. 2009. was the trigger for merger (Economic Times dated 3rd March. The size of the issue was Rs. this RPL has set up the second refinery of Reliance Group close to its first refinery at Jamnagar. As we know. is being merged with RIL. it is a part of the in organic growth strategy followed by Reliance Group. Rs.5% of the total profitability of the 30 SENSEX companies (Economic Times dated 28th Feb 2009). 2009). RIL s turnover in 2001-02. 11950 crores to its reserves. 1464 crore to become the largest private sector company in India. And lo and behold! While this book was going to press. The project was scaled up twice during the implementation stage from 9 million tonnes to 18 million and then to 27 million. In 2001-2002 it bettered its performance by posting turnover of Rs. 343 crore. amalgamation added approx. 2172 crores of which net offer to public was Rs. 33000 crore. RIL is expected to have 19.07. It also added approx. while RIL s equity capital went up by only Rs. ahead of the present largest i. while the western oil major Chevron held 5 percent.
profit for 2009-10 is estimated to be over Rs. 1. however. understand that barring merger of IPCL. Thus we can see how merger has been used very effectively as a growth strategy by the largest private sector company in India. 69 crores (4. its networth is estimated to shoot up to Rs. 84000 crores as of 31st March 2009 (Economic Times dated 3rd March 2009). 1574 crores to Rs. 29000 crores against 2008-09 standalone estimate of over Rs. while at RIL level the growth happened by inorganic route through mergers. While its equity capital will go up by only Rs. 20700 crores. all other mergers into RIL mentioned above were of the group companies.05 lac crores as of 31st March 2010 from the estimated standalone networth of Rs. at Reliance Group level it was still an organic growth .4%) from Rs. One must. immediately post merger. Thus. 1643 crores.
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