RIL and RPL Merger - Who Would be Benefitted?

The $34.5-billion Reliance Industries, India's largest private sector company, on Friday announced that it will consider a proposal next week to merge another group company into itself to bring in operational efficiency.

The Reliance Industries Limited (RIL) board will meet on March 2 to consider merger with Reliance Petroleum Limited (RPL). The merger is effective retrospectively from April 1, 2009.

Reliance Petroleum has claimed an annual crude processing capacity of 580,000 barrels per day, making it the sixth largest refinery in the world. The parent is a Fortune Global 500 company and largest private sector entity in India.

RIL, will issue about 34-crore additional equity shares of market value of approximately Rs 11,000 crore. RIL sold 4% stake in RPL taking its stake down to 71%.

Value of RPL's assets has been put at Rs 21,000 crore by industry consultants and ChemSystems. ChemSystems is a firm providing support in the field of petroleum, chemical and petrochemical industries. The company offers data, analysis, forecasts, training and planning tools to improve understanding and planning in the areas of energy and chemicals.

CHECKOUT: RIL - RPL Merger - What Should Investors Do Now?

The merger would result in accretion of Rs 1,300 crore to RIL's net profit. Post-merger, the equity shareholding of the promoters in RIL would come down from the current 44% to 34%.

The merger would increase RIL's operational synergies and its cost efficiencies would optimise fiscal incentives, enhance financial strength and flexibility. It would also eliminate transfer pricing issues.

I strongly believe this would benefit RIL shareholders in long run considering the fact that now they also have indirect share of Reliance Petroleum and it's profits.

More updates to come soon....

RIL's shareholding pattern:
Promoters: 49%
MF/UTI: 2.53%
FII: 15.52%

RPL's shareholding pattern:
Promoters: 75.28%