Reliance Industries Ltd (RIL) on Friday said it would merge its wholly-owned subsidiary,Reliance Petroleum Ltd (RPL),with it to create an integrated behemoth in oil refining and petrochemicals. In a statement to the Bombay Stock Exchange,RIL said that the boards of the two companies would meet on March 2 to consider a scheme of amalgamation for the two companies. The merger would catapult the entity among the worlds top 10 non-state refineries. As a polypropylene producer,the merged entity would the worlds fifth largest. The merged entity would also rank amongst the top 50 most profitable companies in the world.
The announcement on Friday surprised the market,though an eventual merger of the two companies was expected. RIL sources said markets ascribe higher valuation to integrated energy companies vis-à-vis standalone refiners,as the earnings volatility eases. Both companies are led by Mukesh Ambani as chairman.
Analysts expect the swap ratio to be in the range of 15 to 17 shares of RPL for every share of RIL,in line with the market price of the scrips. RIL dipped 1.97% to close at Rs 1,265.05 on the Bombay Stock Exchange on Friday. RPL was down by 1.23% to close at Rs 76.20.
RILs turnover for FY08 stood at Rs 1,39,269 crore. RPLs Jamnagar refinery began operations last December. It has not yet started giving financial statements. The combined refining capacity of RIL and RPL would be 1,240,000 barrels per day. Both companies have their refineries at Jamnagar in Gujarat. The RPL unit is a 100% export-oriented and can process 580,000 barrels a day. The RIL refinery has a capacity to process 660,000 barrels a day.