The Reliance Industries is all set to go for the merger of Indian Petrochemicals Corporation Ltd (IPCL) with RIL. According to the report, the board of members of both companies has planned to meet on March 10. On that day, both the boards would consider the merger plan. Both companies later issued a statement to the Bombay Stock Exchange after the closing of the daily business.
The report said further that RIL would possibly hold 53 per cent stake in the newly merged when the conversion of preferential warrants would be completed.
Kenin Jain, an analyst, said:
This merger was long overdue. It will complete the entire value chain of petrochemical products for Reliance. This augurs well for both the companies.
Earlier, Reliance was supplying raw materials to IPCL to make final products such as rubber. Now, Reliance will be able to offer end-to-end product solutions. The new development would make RIL as a pan-Indian and perhaps Asian dominant firm. It also would result in substantial tax savings for the merged companies because both companies are buying and selling products from each other.
After the merger, Reliance’s revenue will be increased from chemicals by 4 per cent to 48 per cent of the total. Later, analyst said that one share of Reliance will be equal value of four shares of IPCL. But, according to the book value formula the ratio would be 1:2. Reliance Industries would add more than Rs 11,000 crore in its balance-sheet and Rs 1,163 crore to its profit as well.
Earlier, during the NDA rule in 2002, Reliance had paid Rs 1,491 crore to the government to take 26 per cent stake in IPCL. Then, in August 2006, the Gujarat High Court had legitimate the merger of six polyester manufacturing companies such as Apollo Fibres, Central India Polyesters, India Polyfibres, Orissa Polyfibres, Recron Synthetics and Silvassa Industries with IPCL. After the merger, the speculations have started coming out about the possible merger of IPCL with Reliance Industries.
According to this year fiscal data, petrochemicals production accounts for 31 per cent of Reliance’s revenue. Reliance Industries has been also exploring for petrochemical assets in regions such as the Middle East, North America and Europe. The company was reportedly close to finalize a $20 billion acquisition in North America as well.