India’s largest company by market capitalisation Reliance Industries, sold off 1.5 crore equity shares held as treasury stock, raising Rs 3,188 crore on 17 September ‘09 at an average price of Rs 2,125 per share. In the September ‘08 quarter, eight promoter group companies holding 9.55 crore equity shares of RIL became whollyowned subsidiaries of RIL, when the company converted its loans to these companies into equity. As such, the company currently carries treasury stock of 8.97 crore shares with the Petroleum Trust and 9.55 crore shares under these eight subsidiaries, together valued at above Rs 38,000 crore. The company is expected to sell these shares over a period of time to raise funds for its investment plans.
The company also obtained necessary approvals for merging its subsidiary Reliance Petroleum with itself. The company will be issuing one share of RIL for every 16 shares of RPL on the cut-off date of 29 September ‘09. The entire episode starting from RPL’s IPO in April ‘06 to its merger with RIL, proved unprofitable for IPO investors who would have earned better returns by investing in RIL instead. It may not be in terms of capital appreciation, as even on 20 April ‘06, when RPL’s IPO closed, RIL’s shares were trading nearly 16 times the IPO allotment price. But in terms of the cumulative dividend of Rs 34 per share that RIL paid from April ‘06 till date, RPL did not pay any dividends in the four years of its existence.
This merger entails RIL issuing 6.93 crore new shares expanding its equity to Rs 1,643.1 crore. In the last five years, on an average, RIL has distributed around 13% of its net profit as dividends. Considering this past trend, RIL’s dividend payout for FY09 is likely to be around Rs 2,000 crore, translating to Rs 12 per share of dividend on the expanded equity.
The RIL scrip lost 2% during the week to end at Rs 2,098.7 on BSE as against last Friday’s close of Rs 2,140.95, valuing the company 22.3 times its earnings for trailing 12 months.
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