|
 

 
 

 Before MERGER happens!

˜ Sania Mirza has called off her engagement of seven months to Sohrab Mirza, a
childhood friend of the tennis ace and a wealthy businessman.
˜ A short statement to the press - Sania said that they were ³friends for years but found
ourselves incompatible as fiances.´
˜ And that sure happens to a lot of us. The best friend becomes a life partner and then
things with the life partner don¶t work out. In Sania¶s case, the two of them had
everything going for them, at least on the surface -- looks, money, a friendship going
back years -- but the secret ingredient, compatibility, was missing.
˜ And although they found that out a little late in the day, after a formal engagement,
they did the right thing -- officially ending a relationship on an honourable note takes a
lot of courage and dignity. In fact, the couple's parents even issued statements saying
that their friendship remains unchanged, which is more than you can expect of anyone.
˜ And while it must be hard coping with such a situation as a celebrity, with the world
watching your every move, a break-up involves a lot of heartbreak for anyone.

 £ http£ getahead.rediff.com report
 an
 how-do-you-cope-with-a-painful-break-up.htm

 R    
 

˜ Reliance Industries Limited (RIL) as India's

largest private sector company on all maor
financial parameters with   of Rs
73, crore (US$ .7 billion),  
of Rs 
,7 crore (US$
. billion),  
 of Rs 7,57
crore (US$ .7 billion) and
   of Rs ,3 crore (US$ 9.

billion).
 A R   
˜ The first and only private sector company from India to feature in the

ortune Global 5 list of 'World's Largest Corporations' and ranked amongst
the world's Top
 companies in terms of profits.
˜ Among the world's  most respected energy chemicals companies and
amongst the top 5 companies that create the most value for their shareholders
in a global survey and research conducted by PwC and inancial Times in

.
˜ eaturef in the orbes Global list of world's  best big companies and in T
Global 5 list of world's largest companies.
˜ The 'Best Managed Company' in India in a study by Business Today and A.T.
Kearney in
3. In
, the company emerged as 'India's biggest wealth
creator' in the private sector over a 5-year period in a study by Business Today
- Stern Stewart and as India's 'Most Admired Company' in a Business Barons -
TNS Mode Opinion Poll.
 R  
  

˜ |etails of the Reliance demerger have emerged in a strange

sequence.
˜ That Reliance's financial, telecom and power businesses
would be demerged was first announced at the AGM of
Reliance Industries Ltd (RIL).
˜ On the same day, Anil Ambani, Chairman of the " 
R  " | !  ,   

      
    "
˜ The very next day, R     
   ,
telling the stock exchanges that its board had not yet
considered the ratios.
˜ And,      
 (and long after trading
had closed), the board of RIL announced the demerger ratios,
      from what Anil Ambani had announced.
 |    R

˜ Reliance Industries, India's largest private

sector company, having the widest investor
base in the country (over 3. million) and
group revenues equivalent to about
. per
cent of India's G|P, traded for the last day
on Jan. 7,
 as a consolidated
company.
 |
  # 

˜ As per the 
    $  R $ 

 % , the Ambani brothers -- Mukesh and
Anil ± were expected to head different businesses and
five listed companies have to emerge as potential
investment opportunities by March 
.
˜ The !& '    (!' )%   
*$  +%  under the chairmanship of Justice
(rtd) M L Pendse, approved the demerger scheme with
more than 99 per cent members voting in its favour.
˜ Uowever, a    , 
$,$ 
    Kalpesh B Mankad had raised
his obections in the EGM.
 -.          

˜ As an intervenor in the Uigh Court, he in an affidavit, claimed

that RIL had       $ , depriving
shareholders of the company of their right to get complete
information about these issues.
˜ Ue had further claimed that the company had also not informed
shareholders about its financial position, which amounted to
, 
  .
˜ Mankad apprehened  "  " if the scheme was
approved.
˜ R   /$ £ After the demerger the transferred
assets are to be held by new entities to be    of RIL.
˜ "As every RIL shareholder would be  /   
 ,
 
 , there is no scope for any unfair
swapping of assets and members would not lose on their
investment," he contended.
 ' 0 |
   

˜ * | " 1% %  #
$ 2  Justice Mhatre

declined to grant six weeks stay on the Uigh Court order
sought by Mankad, a shareholder and approved the
demerger of Reliance Industries group companies aimed at
settling dispute between the Ambani brothers, Mukesh and
Anil.
˜ Over-ruling obections of a
   , Justice
Nishita Mahatre passed the order granting approval to the
RIL demerger scheme.
˜ The Mukesh Ambani-headed RIL had moved  2
 on September 
,
5 to get its  for the
demerger scheme aimed at the settlement with his younger
brother Anil.
   
     2

˜ After getting a certified copy of  #
$ 2

   dated |ecember 9,
5 sanctioning
 
 
 between RIL and the
`  
 ' - Reliance Energy Ventures
Ltd, Global uel Management Services Ltd,
Reliance Capital Ventures Ltd and Reliance
Communication Ventures Ltd - and  
        % 
 
R   
  (R) and
then RELIANCE Industries Ltd 
 -
&  on | " +%  that its demerger
scheme has become effective on that day.
|
   R  $ -
- 

˜ Three entities, Reliance Industries,

Reliance Capital and Reliance Energy
were already listed at the exchanges and
they were expected to be re-valued by
analysts in a new demerged business
scenario.
˜ Two other companies were to be listed by
March
.
 ´  

˜ -  Ambani got complete and independent control

over the  &%  %  
 
 &  $     3 3 4  R 
        5 

 (5" Ue got the biotech firm Reliance Life
Sciences and Trevira, a European company manufacturing
polyester fibres.
˜  Ambani got control over  , 

 and
     -   
 
which come under the umbrella of the  |$

$ !  ( | !) , as part of the
Reliance group.
 ´  

˜ As per plan, these four companies were R 

 6    (to be amalgamated with
listed Reliance Capital), R  ! 
6   (to be amalgamated with Reliance
Energy), R  

 6  
(mainly including R  


R  7  
) and '$
 

    (for gas-based energy
undertakings).
 A 
-  

˜ As a unified conglomerate, Reliance had the advantages of

scale ² the economies, the cash flows, the investment
leverage.
˜ It had the culture, the ambition and the resources to think
big like no other entrepreneur had thought.
˜ Its strength was creating huge assets, massive capacities, on
an unheard of scale.
˜ The duo worked well ² Mukesh set up proects, Anil
engineered finances.
˜ Now they will have to gain experience in one another¶s
strength.
˜ Particularly, because both businesses need both these skills.
  
 
 %
   

˜ TUE demerger of RIL has created confusion among fund

managers, IIs and traders who followed the Sensex and
the Nifty index.
˜ The  
 
  was£  
$      
   
         
 %  
 $    


˜ or traders in the   
- , the confusion was
    &     R - 
         
 . After
the demerger, the value of RIL share would fall.
˜ RIL has the second highest weightage of 9. per cent on
the Nifty and the highest on the Sensex at . per cent.
  
 
 %
   

˜ In the past too, companies on the index have been

demerged.
˜ or instance, |abur Pharma was de-merged from |abur,
which was part of S&P CNX Nifty Junior.
˜ NIIT, then a part of the Nifty, was demerged into NIIT
Technologies.
˜ Similarly, Ultratech Cement was formed after the demerger
of Larsen & Toubro's cement division.
˜ In most cases, trading in the companies' shares was
suspended for some time. But, trading in RIL shares would
continue. "Each is different and has to be looked into
separately," said an NSE official on that day.
  
 
 %
   

˜ A 
  managing the Nifty index said,

"I do not know what to do with the shares of new
companies (formed after the demerger) as an index
fund does not allow investment in stocks outside
the index."
˜ According to him,  ´ 6 would be a
problem, as it is difficult to put a value on unlisted
securities.
˜ This was also a nagging issue for   
 that
invest in Nifty and Sensex stocks alone.
  
 
 %
   

˜   have to adust their index portfolio

with the same weightage as in the index.
˜ They would have to sell shares of RIL and buy
shares of other companies in the index. This
happened due to the weightage of RIL in the
Sensex and the Nifty falling, while the weightage
of other stock increases.
˜ or traders, the problem was that if they held Nifty
futures till January ,
, they could lose
money as the price of RIL shares would fall and
this in turn would affect the index value.
  %  ( 
$)

˜ The Board of |irectors of Reliance Industries Ltd. (RIL)

unanimously approved the scheme of |emerger of the
businesses of the company.
˜ The Board at its meeting held on June ,
5 had resolved
in principle to consider reorganization of the businesses of the
Company and authorized   '  
-  3 Interface Committee of |irectors ('CG
Committee') to &
    all the relevant issues
including      /
 for a suitable
reorganization of Company's businesses and suggest a
proposal to the Board including any Scheme of |emerger.
˜ On August
,
5 the Board approved in-principle the
proposal for demerger.
  % 

˜ CRISIL, JM Morgan Stanley, |eloitte Uaskins and Sells and

M s Amarchand Mangaldas and Suresh A. Shroff & Co were
appointed to   ' 

   #.
˜ The CG Committee along with the Advisors presented a
Scheme for the approval of the Board of |irectors.
˜ In accordance with the     ,   

   3   ,   and the
$8   -  for all shareholders, the Board
of |irectors, after extensive  $  and ,
have approved the Scheme of |emerger.
˜ The Scheme of |emerger as approved by the Board is subect
to such approvals as may be required including that of the
Stock Exchanges, Mumbai Uigh Court and Shareholders'
approvals.
 7   | .  
$  +% 

˜ The Scheme proposes to demerge assets and

liabilities of the following undertakings of
RIL
˜ Telecommunications Undertaking
˜ Coal based energy Undertaking
˜ inancial Services Undertaking
˜ Gas based energy Undertaking
 R  



˜ +" R  

 6   "

˜ +"+" Reliance Communication Ventures Limited for telecommunications
Undertaking including RIL's investments in Reliance Communications
Infrastructure Limited (RCIL), Reliance Infocomm Limited (RIC) and
Reliance Telecom Limited (RTL).
˜ +"" Reliance Communications Infrastructure Limited has set up the
backbone infrastructure required by Reliance Infocomm Limited for its
telecom operations.
˜ +"9" Reliance Infocomm Limited was set up to provide wireless and
wireline telecommunication services based on C|MA technology in
various parts of India.
˜ +":" Reliance Telecom Limited was promoted for providing cellular mobile
telephony services using the GSM technology in East and North-East India
and basic telephone services in Guarat.
 R  ;;; R  



˜ 9 crore equity shares of face value of Re. each in

Reliance Communications Infrastructure Limited,
˜ 39.
 crore equity shares of face value of Re.
each in Reliance Infocomm Limited and
˜ .7 crore equity shares of face value of Rs. each
in Reliance Telecom Limited.
˜ The     
  R in the
Undertaking to be demerged into Reliance
Communication Ventures Limited is approximately
R" +%:  .
 R  ! 

˜ " R  !  6   
 

˜
.. Reliance Energy Ventures Limited for coal
based energy undertaking including RIL's
investments in Reliance Energy Limited
˜
.
. Reliance Energy Limited engaged in the
generation, transmission and distribution of power.
˜
.3. RIL owned 9.9 crore equity shares of face
value of Rs. each in Reliance Energy Limited.
˜
.. The value of the investments of RIL in the
Undertaking to be demerged into Reliance Energy
Ventures Limited is approximately R"9%  .
R  

˜ 3. Reliance Capital Ventures Limited

˜ 3.. Reliance Capital Ventures Limited for
inancial Services Undertaking including
insurance.
˜ 3.
. Reliance Capital is in the business of
    including asset management.
˜ 3.3. Reliance '    in the business
of general insurance activities.
˜ 3.. Reliance   is yet to commence
business.
 R  ;;; R  

˜ RIL currently owned

˜ . crore equity shares of face value of Rs. each in
Reliance Capital Limited,
˜
.55 crore equity shares of the face value of Rs. each in
Reliance General Insurance Co. Limited and
˜ .5 crore equity shares of the face value of Rs. each in
Reliance Life Insurance Company Limited.

˜ The value of the investments of RIL to be demerged in

Reliance Capital Ventures Limited is approximately R"<
 .
' $    = -

˜ Global uel Management Services Limited

for gas based energy undertaking.
˜ The book value of RIL investment in this
company was not significant.
    |
  ! 

˜ All shareholders of RIL, except the   

  ', would be issued shares of de-merged
undertakings in £ ratio i.e., for each share held in RIL,
shareholders would get£
˜ One share of Reliance Communications Ventures Ltd. of
face value Rs. 5 each fully paid-up
˜ One share of Reliance Energy Ventures Limited of face
value Rs.  each fully paid-up
˜ One share of Reliance Capital Ventures Limited of face
value Rs.  each fully paid-up
˜ One share of Global uel Management Services Limited of
face value Rs. 5 each fully paid-up
    |
  ! 

˜ The       i.e. Trustees of Petroleum Trust

(holding 7.5% of RIL) and four companies - Reliance
Aromatics and Petrochemicals Pvt. Ltd., Reliance Energy
and Proect |evelopment Pvt. Ltd., Reliance Chemicals Pvt.
Ltd. and Reliance Polyolefins Pvt Ltd (collectively holding
.7% of RIL) hold RIL shares for the economic benefit of
RIL shareholders.
˜ The Specified Shareholders will not take shares of the
resulting companies. The RIL shareholders will get
proportionate benefit of this also.
˜ As a result thereof, the total number of shares to be issued by
each of the resulting companies would be 

crore as
against 39 crore equity shares of RIL.
 #   ,   

˜ The shareholders of RIL continued to   

     R (A global oil, gas, refining
and petrochemicals company). They would continue to hold
the 

$     as they currently hold in RIL.
˜ Received separate      
   ,
which allowed them to   as well as
   in the       
% 
       based energy businesses.
˜ The shares of the resulting companies (to be) listed on the
Stock Exchanges in India, where RIL shares are currently
listed, thus providing / to all shareholders.
˜ =-   for all shareholders as they can participate
directly in all the businesses that RIL has nurtured and
brought to stature.
 #   ,   

˜ All RIL shareholders were issued shares of the demerged

companies in a £ ratio. So        +
R       £
˜ +   of Reliance 

 Ventures Ltd,
+   of Reliance !  Ventures Ltd (REVL), +
  of Reliance  Ventures Ltd (RECL) and +
  of Global
  
 Services Ltd.
˜ REVL 

 with Reliance Energy and RECL
with Reliance Capital -- following a board decision -- R
          R!  R 
 based on an earlier approved     
.
 #   ,   

˜ The ratio approved was 7.5 shares of Reliance

Energy for  shares of REVL held and 5 shares
of Reliance Capital for  shares of RECL held.
˜ £ Risks would be lower as some 'unrelated'
business undertakings will be demerged.
˜ And further there will be unlocking of value and if
an RIL shareholder holds these shares, he will
continue to receive benefits in terms of growth
from unrelated Reliance Capital, Energy and
Infocomm businesses anyway.
 5         '"+>% <
(A  )

˜ The BSE and the NSE UEL| a special one-hour trading

session on Jan. ,
 from .-9. a.m. to facilitate price
discovery of the post-demerger price for Reliance Industries
Ltd.
˜ Only Reliance Industries was traded in this session, 
  , while the unlisted companies were to be listed
in coming months.
˜ While the special trading session was on, it had    
  
-     & 4 ´.
˜ The closing price for Reliance Industries after the special
trading session was used to determine the opening level of
indices (and a new RIL weightage in the indices) at . a.m.
on January ,
.
˜ The volume weighted average price of RIL during this above
session was used for adustment to the base m-cap of the
respective indices.
5         '"+>% <

˜ People watched the session with &   


  about a company with revenues of Rs 73,
crore add up to
. per cent of India¶s G|P, whose
market capitalisation of Rs 
9,339 crore is      
#!? 
-  , whose weight in the
Sensex was 
. per cent, whose price is up 5 per cent
since June
5.
˜ =-      for 9 -
-  , the shares of Reliance Industries Ltd (RIL)
on TUE APPOINTE| |A opened at Rs. 7
.9 on the
Bombay Stock Exchange (BSE) in an     
     to discover the price of the scrip
after its demerger.
5         '"+>% <

˜ It was quoted at Rs. 99 on the National Stock Exchange

(NSE). The stock touched an intraday high of Rs. 7
.7
and an intraday low of Rs.  on the BSE.
˜ In all, .
crore shares were traded on the BSE and
.3
crore shares on the NSE.
˜ The previous closing price of RIL was Rs. 9
.5.
˜ The BSE and the NSE combined turnover had crossed
Rs.
, crore.
˜ Turnover was about half the total turnover on the NSE
the previous day and a third of the turnover on the NSE
and the BSE combined.
 ´! R  

˜ The NSE in a release stated that the special session for

Reliance Industries was held from  a.m. to 9 a.m. so as to
discover the price after the demerger.
˜ "Trading activity was normal and the number of orders was
. lakh, number of trades was 3.
5 lakh, number of
shares traded was 3.9 crore and the total traded value was
Rs.
, crore. After the close of the special session the
volume weighted average price for Reliance Industries was
Rs. 7.35. The adustments to the base index value were
suitably carried out to compute the index value so as to
give effect to the demerger of Reliance Industries Ltd,".
 6 =! =´*@!|

˜ The demerger of Reliance Industries Limited (RIL)

has unlocked unprecedented value for more than
3
lakh Reliance shareholders.
˜ By January 9,
, RIL's market capitalisation
has increased over 5% from June
5,
outperforming the Sensex by nearly
%, and
adding a record Rs. 55, crores to shareholder
wealth, in a short span of    
.
 A $ R    

˜ http£ www.rediff.com money
 an 7spec.htm

˜ http£ www.reliancecommunications.co.in webapp
Communications sp media press_release_detail.sp
?id=79
˜ http£ www.iimahd.ernet.in
rvarma blog index.cgi

 reliance_delisting.comments
˜ http£ www.prdomain.com companies R RelianceIn
dustries newsreleases
5

77.htm
 ´  

˜ ³REL, Reliance Cap clarify on demerger´, the Uindu Business Line,

August ,
5.
˜ ³Reliance |emerger comes into effect´, the Uindu Business Line,
|ecember

,
5.
˜ ³Reliance demerger catches fund managers, traders on wrong foot´,
the Uindu Business Line, |ec.
,
5.
˜ ³UC to hear Reliance demerger scheme on riday, The Times of India,
November
,
5.
˜ ³Mukesh, Anil, you & me£ Will Reliance demerger unlock value? Will
other companies take the same route´, The Indian Express, Jan. 9,

.
˜ ³Reliance unlocks shareholder value´, the Uindu Business Line, Jan.
9,
.
˜ ³Special trading session for Reliance Industries´, the Uindu, |ec. 3,

5.