The promoters of Reliance Industries, including its chairman Mukesh Ambani, plan to increase their holding in the company from 50.59% by about 5% in an effort to shut out any opportunity for a hostile bid to acquire the company. Previously, between March 2006 and December 2006, the promoters had increased their holding from 47.9% to 50.59%.
According to guidelines of the stock market regulator, Sebi, promoters can increase their stake by up to 5% at a time without having to make an open offer to public shareholders. A senior RIL official close to the development who did not wish to be identified said that the price at which Ambani was buying the stock reflected his confidence in the company.
On Friday, RIL’s stock closed at Rs1,413 on the Bombay Stock Exchange, almost unchanged from the previous day’s close, even as the broader market fell by 2.77%. At this price, 5% of the company’s equity works out toRs9,844 crore.
On Saturday, one of the items on the agenda of a scheduled board meeting of RIL, is a preferential issue of equity shares to Ambani, and to companies controlled by him and his associates. The issue price will be based on an average of the price of the company’s stock on the stock exchanges over a period of time. Since April 1, 2006, RIL’s stock has risen 77% on BSE.
The move by Ambani to increase the holding of promoters in RIL comes at a time when other large business houses such as the Tata group and the Aditya Birla group have been increasing the stake of the promoting family and holding firms in various group companies. Ambani himself holds only 0.13% in RIL in his personal capacity. The bulk of the promoter holding in the company is through investment firms that are controlled by Ambani. Foreign institutional investors own close to a 20% stake in RIL.
The board will also consider a proposal to raise debt from the international markets, and issue debentures in the domestic markets and convertible bonds in the overseas markets. The company proposes to utilize these funds for new projects such as retail and a special economic zone under development in Haryana, and to finance $2 billion capital expenditure in the oil and gas exploration business.
(CH Unnikrishnan also contributed to this story.)