Reliance Industries is considering merging group firm Indian Petrochemicals Corporation Limited with itself. The boards of both the companies will meet on March 10 to consider the plan. The merger, if approved, would add more than Rs. 11,000 crores to Reliance’s balance sheet and Rs. 1163 crores to its profits, based on IPCL’s fiscal 2006 financials.
Reliance Chairman Mukesh Ambani and his associates will hold nearly 53% stake in the merged entity after the conversion of preferential warrants. The promoters are in the process of subscribing to preferential warrants to scale up their stake by 4% from 50.4%. Reliance had paid Rs. 1491 crores to the NDA government in 2002 to take over 26% of IPCL’s equity. It came out with an open offer and increased its stake to 46%. The government now holds 0.35% in the company.
Post-merger, Reliance would offer end-to-end product solutions, which would give it a pan-Indian and perhaps Asian dominance. The merger could also result in substantial tax savings for the merged entity as Reliance buys certain products from IPCL and vice-versa. The merger may help Reliance increase its revenue from chemicals by as much as 4% to 48% of the total. IPCL uses naphtha made at the parent’s refinery as feedstock to make chemicals.
Read the Business Standard article.
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