RELATED ARTICLES |
Shareholders will get one Reliance Power share for every four RNRL shares. Once the merger is effected, RNRL, which was created to buy gas from Reliance Industries (RIL), will cease to exit.
After the deal, which stock market experts billed “extremely positive for Reliance Power in the long term”, Reliance Power will have more than six million shareholders. The group said the merger would create the “world’s largest shareholding family”.
RNRL said in a statement the deal would help Reliance Power to source gas from RIL through its master gas supply agreement for its around 10,000 mega watt (mw) gas-based power projects, including the 8,000 mw Dadri power project in Uttar Pradesh.
Besides, the deal would give them access to gas from RNRL’s four coal-bed methane (CBM) blocks in the northeast, apart from an oil and gas exploration block in Mizoram.
“Reliance Power would have access to an estimated resource of around 193 billion cubic metres from four CBM blocks with an acreage of 3,251 sq km, and an additional 10 per cent share in an oil and gas block in Mizoram, with an acreage of 3,619 sq km, having a reserve potential of up to 28 billion cubic metres,” the statement said.
According to the statement, Reliance Power would also have an “enhanced reliability and cost efficiency for fuel supplies through RNRL’s coal supply logistics and shipping business.”
KPMG, a leading audit and advisory firm, was the independent valuer of the deal.
Market experts believe the merger would be extremely positive for Reliance Power in the long term as it would help consolidate its natural resources and the balance sheet.
Harinder Kumar, a partner at Delhi-based law firm Hammurabi and Solomon, said it was a consequence of the non-compete agreement that RIL and Anil Ambani group signed a few days ago. “Now, post the merger, shareholders' benefits would get enhanced without much difficulty. The natural resources with RNRL would be properly utilised by Reliance Power, which is lying idle as of now. Also, I don’t think there is any question of wrong valuation since it is approved by the Accounting Standards Board,” Kumar said.
S P Tulsian, a Mumbai-based independent broker, said, “Although the deal would be positive for Reliance Power, the valuation could have been 5:1, since the book value of RNRL is Rs 12 and that of R Power is Rs 60 per share. Also, I don’t see any structural shifts happening post the merger. The objective is simply to secure the gas supply for Reliance Power’s gas-based projects,” Tulsian said.
“The shares of RNRL are expected to open lower at Rs 43- Rs 44 on Monday from the current Rs 63.5, but that of Reliance Power may see an uptick of Rs 2-Rs 4 per share,” Tulsian said.
However, the company says, RNRL shareholders representing around 80 per cent of its capital are also shareholders of Reliance Power, and more than 80 per cent of them received their shares free on demerger from RIL.
According to Priyadarshi Srivastava, head of sales at IDBI Capital, the Anil Ambani group is now moving ahead on a growth path and is consolidating its businesses. First, they sold off their tower arm and now they have merged the shell company with a bigger and a better group company.
“All these moves will add value to their existing business and help them move on a better growth path in the long term. In the short term, I think there is no immediate trigger for Reliance Power shares to move more than Rs 2-Rs3. The market has already factored these issues in the share prices,” Srivastava said.
The deal would come into effect after it is approved by shareholders, stock exchanges and the high court.
 Limited.JPG)
Post new comment