A Critical Analysis on RIL-RPL Merger

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This dissertation was completed by Meenakshi Bisht (2008 – 2010) on the topic A Critical
Analysis on RIL-RPL Merger

Summary
The recent buzzword in the corporate India is Mergers and Acquisitions and the whole gambit
of companies are going in for domestic and global acquisitions. This includes Tata’s, The Aditya
Birla Group, Reliance, Ranbaxy to name a few.
What needs to be seen is how well the Indian companies are able to manage the buyout.
Managing a domestic acquisition or overseas acquisition will a tough job for the buyers and it
will take them time to reap the benefits of the deal.
Moreover the overseas acquisitions call for lot of capital outflow and that again needs careful
control and observations to see if the capital outflow will result in some future capital inflow in
the country. It is also imperative to evaluate the actual cost benefit of the target valuation.
This research has tried to give the basics of Mergers and takeovers. I have taken up the sectoral
analysis of the recent mergers to identify the areas where the major mergers are taking place.

Limitations of Study:
It is important to critically evaluate the results and the whole study on the primary data. The
present study has certain limitations that need to be taken into account when considering the
study and its contributions. This study has focused on a phenomenon that is a very extensive
and major. Clearly, this represents a challenging task for research regardless of the more
specific interests that the study may have. In this study, this extensive and complex
phenomenon has been studied from a rather narrow empirical perspective. By understanding
something about this particular case more in depth, I might eventually also learn something
more apart from the research study and should be implemented in general. In this research
report there are certain things which need to be explored and should be investigate at a big
approach. I had faced a limitation during a research, which was regarding the feasibility of the
appointments with the investor and shareholders and there was certain limitations with
organizations. Apart from that there were also some time constraints and cost constraints
which limited the exposure of my research to a certain level. The report also contains much
part of secondary data because of less participation of shareholders and investors.
In addition to winding up the limitation and the perspectives of the research report, it was also
very interesting to gain the knowledge and understanding of the topic and market analysis.

Conclusions:
I believe the deal is a win-win situation for both companies, as RIL will have improved Cash-
flow, stronger Balance Sheet and lower cost of capital post merger. For RPL shareholders, the
merger is expected to reduce Earnings volatility and allows them to participate in RIL's full
energy value chain. Both the companies have lots of benefit and synergy between each other.
The merger will unlock significant operational and financial synergies that exist between RIL and
RPL. It creates a platform for value-enhancing growth and reinforces RIL’s position as an
integrated global energy company.
The merger will enhance value for shareholders of both companies. The merger is EPS accretive
for RIL. Through this merger, RIL consolidates a world-class, complex refinery with minimal
residual project risk, while complementing RIL’s product range. There will be further gains from
reduced operating costs arising from synergies of a combined operation.

The merger will result in RIL:

• Operating two of the world’s largest, most complex refineries
• Owning 1.24 million barrels per day (MBPD) of crude processing capacity, the largest refining
capacity at any single location in the world
• Emerging as the world’s 5th largest producer of Polypropylene

Tips for investors:

From the above discussion, we will conclude that how the share price of RIL will get move or
change after the merger. If after the merger it will not make any great change in the working of
both companies, but this will help in some reduction in the operational cost. So this will not
make any great change in the share price of the RIL.
If efficient market hypothesis ,the market is move according to the rumors ,but Indian market is
known as the semi strong form market hypothesis ,means that the prices of shares already
reflected all the past information and corporate actions. So this again will not move the prices
of share.
But the 70% of the Indian investors are Rational Investors, and they work on sentiments. So this
will increase the share prices due to this positive movement.