News: RIL move on mega-preferential to Mukesh

(DNA 24/02/2007) Mumbai - The board of Reliance Industries is slated to meet on Saturday to decide on a preferential issue of warrants/shares to its promoters - Mukesh Ambani and associates.

It is billed as the largest preferential offer ever made to Indian promoters, sources say. The company might issue preferential warrants in the region of Rs 13,500 crore, which is close to $3 billion, sources add.

This would take the promoters stake to 55 %; they will have to cough up 10% immediately with the balance amount payable in 18 months.

In the past one year, the promoters led by Mukesh Ambani have increased their stake from 46.67% to 50.62%, by mopping up shares from the stock markets.

Mukesh Ambani, chairman and managing director of the country’s largest private sector company in turnover and shareholder wealth, has over the past one year been steadily acquiring shares of Reliance Industries from the open market. The RIL share price thus climbed from a 52 week low of Rs 695.15 per share to Rs 1444.80 per share.

Bucking the general downswing in the markets on Friday, RIL share lost just a rupee to close at Rs 1412.80, indicating that the markets were sensing something afoot in the counter. That is, the promoter is giving its vote of confidence by buying RIL shares at valuations close to its historic highs.

Sebi norms allow promoters to increase their stake up to 55% of the equity cap at valuations close to the last two-week’s average market price. Sources say that Mukesh Ambani’s move is in line with the recent trend of Indian promoters hiking stake to fortify their control and ward off hostile takeovers. In the past, Tata Steel, Reliance Capital, Reliance Energy and United Phosphorus have seen promoters hiking stake via preferentials in the past.

Reliance officials declined to comment on this.

The board on November 9, 2006, had approved a plan to raise $2 billion to fund its on-going capital expenditure across new projects that include external commercial borrowings, convertible debentures, preference shares and foreign currency convertible bonds and syndicate loans.