Reliance Industries raises $660 mn in share sale, stock falls

Reliance Industries raises $660 mn in share sale, stock falls

Mumbai: India’s Reliance Industries Ltd raised about $660 million in a move likely to help the country’s largest listed firm make acquisitions, analysts said.

Reliance’s sale follows the $630 million IPO of Adani Power last month and the $1.25 billion IPO of NHPC Ltd, and a raft of institutional share placements as firms capitalise on a stock market up some 70% this year.

“This definitely adds to their coffer for possible acquisitions," said Alex Mathew, head of research at Geojit BNP-Paribas Financial Services. “They have plans both within and outside India."

Reliance did not give any details on how it would use the funds. The company is the most widely held stock by fund managers in Indian in terms of the value of investments.

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In September 2008, Reliance said it wanted to acquire discovered oil and gas assets abroad and would look at fields in the Middle East, Latin America and the Far East, shifting its focus from exploration as it looks to balance its business portfolio.

“In our opinion, overseas exploration and production assets could be likely targets," said UBS analyst Harshad Katkar.

“The company has a cash of $4.6 billion and gross debt of $10.8 billion. We believe that with such strong financials and cash raised from the proposed sale of treasury stock, the company would be looking aggressively at growth opportunities," he added.

Indian brokerage Motilal Oswal said in a report Reliance’s management had indicated the sale of the shares was intended to create a “more comfortable" cash position.

Reliance sold 15 million of treasury stock at an average share price of 2,125 rupees ($44.3), a 2.7 percent discount to Wednesday’s close of 2,183.5 rupees.

The company’s shares ended down 4.5 percent at 2,086.4 rupees, its lowest close since 8 September, and its biggest daily fall since 17 August. The broader market edged up 0.2% at 16-month closing high.

Valued at about $70 billion, Reliance has the largest weighting in the main 30-share index. The company’s shares have risen about 70% so far this year, just behind a 73% rise in the main index.

J.P. Morgan analyst Pradeep Mirchandani said Reliance planned about $4 billion capital expenditure in the year to March 2010, and could have raised the money to strengthen its balance sheet.

“We see exploration and production, organised retail, and city gas as the main investment avenues over the next two to three years," Mirchandani said in a note.

Reliance’s initial planned sale of 10 million shares was increased by 5 million, or half the overallotment option in a deal handled by Citigroup and Bank of America Merrill Lynch.

Analysts said the near-term share performance would depend on the how the funds raised would be used, and the outcome of an ongoing dispute with Reliance Natural Resources.

Reliance Industries, headed by billionaire Mukesh Ambani, and Reliance Natural Resources, led by his estranged brother Anil, are battling over details of a gas-supply deal agreed upon when the Reliance empire was split between the two in 2005.

The case will be heard in the Supreme Court on 20 October. The gas in dispute comes from the vast Krishna Godavari (KG) basin off India’s east coast, where Reliance Industries made the country’s deepest and biggest gas find.

Reliance started pumping gas from the field in April, and when production is running at full throttle it is expected to nearly double India’s gas output.