History of Mergers of Reliance Industries Limited (RIL) In May 1973, a company named as Mynylon

Limited was incorporated in Karnataka 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
refinery project at Jamnagar. The size of the issue was Rs. 2172 crores of which net offer to public was
Rs. 862 crores. The project was scaled up twice during the implementation stage – from 9 million tonnes
to 18 million and then to 27 million. Hence the project got delayed and was commissioned in the
financial year 1999-00. It posted a sterling performance in the first full year of operations i.e. 2000-01
with the turnover crossing Rs. 30000 crore and net profit of Rs. 1464 crore to become the largest private
sector company in India, ahead of RIL. In 2001-2002 it bettered its performance by posting turnover of
Rs. 33117 crore and net profit of Rs. 1674 crores. In March 2002, Reliance Group announced merger of
RPL with RIL with retrospective effect from 1st 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 approx. Rs. 11950 crores to its
reserves. More importantly, RIL’s turnover in 2001-02, which would have been approx. Rs. 24000 crore,
shot up to Rs. 57000 crore on account of RPL’s turnover of Rs. 33000 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% stake in IPCL through its investment company Reliance Petro Investments Limited at the cost of
approx. Rs. 2638 crore. In March 2007, RIL announced IPCL’s merger with itself retrospectively from 1st
April 2006 and with the swap ratio of 1:5. This merger led to RIL equity capital going up by just Rs. 60
crores while its reserves shooting up by approx. Rs. 5460 crores. It also added approx. Rs. 12000 to
13000 crore to the turnover of RIL in 2006- 07. And lo and behold! While this book was going to press,
on 2nd 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. 1 share of RIL for every 16 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 1st April 2008.
At the time of merger announcement RIL held 70.3 percent stake in RPL’s equity, while the western oil
major Chevron held 5 percent, rest being with the public. Chevron had an option to increase its stake to
29 percent subject to Chevron signing crude supply and product off-take agreements. While 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 percent stake, was
the trigger for merger (Economic Times dated 3rd March, 2009). 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, 2009 (Economic Times dated 28th Feb 2009). However, in reality neither the merger nor its
timing is any surprise. As can be seen from the earlier paragraphs, it is a part of the in organic growth
strategy followed by Reliance Group.Let us see how RIL would look post this merger. Post this merger,
RIL is expected to be largest company by market capitalization, ahead of the present largest i.e. 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% of the total turnover and 16.5% of the total profitability of the 30
SENSEX companies (Economic Times dated 28th Feb 2009). Post merger RIL’s turnoverfor 2009-10 is
estimated to be Rs. 2.60 lac crores as against 2008-09 standalone estimate of Rs. 1.60 lac crores; its net
profit for 2009-10 is estimated to be over Rs. 29000 crores against 2008-09 standalone estimate of over
Rs. 20700 crores. While its equity capital will go up by only Rs. 69 crores (4.4%) from Rs. 1574 crores to
Rs. 1643 crores, immediately post merger, its networth is estimated to shoot up to Rs. 1.05 lac crores as
of 31st March 2010 from the estimated standalone networth of Rs. 84000 crores as of 31st March 2009
(Economic Times dated 3rd March 2009). Thus we can see 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 merger of IPCL, all 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