News: Promoters to up RIL stake 5%

(BS 23/02/2007) Mumbai - RIL to issue preferential shares to Mukesh, promoters to up existing 50.62% stake.

The promoters of Reliance Industries (RIL) are preparing to scale up their holding by up to 5 per cent from 50.62 per cent through a preferential share issue.

The move, which follows Tata Sons scaling up its stake in Tata Steel by 2 per cent in the recent past, is aimed at taking the promoters’ holding in RIL beyond the reach of hostile takeover attempts.

The RIL board is expected to discuss the issue of preferential shares to the promoters at its meeting tomorrow.

The meeting may also discuss the company’s investment plans for oil and gas and retail businesses.

A review of the company’s earlier decision to raise $2 billion (Rs 9,000 crore) to finance capital expenditure in oil and gas exploration is also expected.

When contacted, an RIL spokesperson declined to comment.

Sources in the know of the development said the Mukesh Ambani-led promoter companies may scale up their holdings by the maximum permissible limit of 5 per cent in tranches. In other words, the promoter group might subscribe to a mix of fresh equity and convertible warrants.

The Securities and Exchange Board of India has allowed a maximum increase of 5 per cent in promoter holdings in one year, through preferential allotment of shares or creeping acquisitions.

To raise their stake by 5 per cent, the promoters will have to subscribe to around 150 million preferential shares.

Sebi norms require a preferential issue to be priced at or over the last six months’ average stock price. A back-of-the-envelope calculation suggests that at the last six months’ average price of Rs 1,250 a share, Mukesh Ambani will have to chip in with Rs 19,000 crore to scale up his stake by 5 per cent.

The promoters have been raising their stake in RIL since the group’s businesses were split between Mukesh and his brother Anil in June, 2005. Their stake has gone up by 4 per cent since that time.