Merger effect: RNRL tanks 27%, R-Power up over 3%

Merger effect: RNRL tanks 27%, R-Power up over 3%

Mumbai: ADAG firm Reliance Natural Resources (RNRL) on Monday fell over 27%, while the group firm Reliance Power closed up over 3% after touching a 52-week high intra-day.

On Sunday, the boards of both the companies approved the merger of RNRL with Reliance Power in an all-stock deal with an exchange ratio of one equity share of R-Power for four shares of RNRL.

Shares of RNRL plunged 27.26% to close at Rs46.30 on the Bombay Stock Exchange. The scrip touched a month low of Rs45.50, down 28.51% during the day.

On the contrary, the shares of Reliance Power remained strong even in a volatile market to surge to a 52-week high of Rs189.80, up 8.36%. The stock, however, pared the early gains and closed at Rs181.40, up 3.57%.

“This deal has left the RNRL shareholders in a very tight situation. It will be a difficult time for the investors of both the firms, as it will take at least three-four years for Reliance Power to get the benefits of gas promised by Reliance Industries (RIL). The shareholders are left with no choice but to stay invested," Geojit BNP Paribas Financial Services assistant vice president Gaurang Shah said.

The ADAG group has claimed that R-Power would reap benefits from RNRL’s coal bed methane blocks, and fuel supplies through the latter’s coal supply logistics and shipping business. The combined entity would have over 60 lakh shareholders, the largest in the world.

The statement further said RNRL shareholders will benefit from the proposed amalgamation by participating in future growth prospects of Reliance Power’s diversified generation portfolio of 37,000 mw and its substantial coal reserves in the country and abroad.

Following the merger, the current valuations peg the market capitalization (m-cap) of the combined entity at over Rs52,000 crore. At the end of Friday’s trade, the m-cap of R-Power stood at Rs41,979 crore and of RNRL at Rs10,394 crore.

Meanwhile, the BSE benchmark Sensex ended flat at 17,441.44 points, down 0.11% from the previous close.