The Hindu : Business : Anil fails to convince RIL board on bonus issue

Online edition of India's National Newspaper
Friday, Dec 31, 2004

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Business

Anil fails to convince RIL board on bonus issue

NEW DELHI, DEC. 30. Details of the crucial Reliance Industries' board meeting in Mumbai on Monday available today indicate that Anil Ambani had made a diversionary move to stall the proposal for buyback of shares, but found himself up against the board that was solidly behind his elder brother Mukesh Ambani.

Mr. Anil, RIL's Vice-Chairman and Managing Director, went to great lengths to convince the 12-member board that it would be better to have a "bonus issue'' instead of buyback of shares for which Mr. Mukesh, the company's Chairman, had called the December 27 meeting. But the board approved the buyback proposal.

Sources having knowledge of the board proceedings said that as per the company law, no proposal could be discussed without giving a seven-day notice to stock exchanges.

Mr. Anil, fighting a bitter battle with Mr. Mukesh, made a slide presentation during the board meeting to emphasise as to why a bonus issue was a preferable option than the buyback for shareholders, the sources said.

The sources said that Mr. Anil, through his presentation, wanted the board to rethink about the issue of buyback before the entire board rallied behind Mr. Mukesh to clear the proposal for which a provision of Rs. 2,990 crores was approved at the meeting.

In support of his idea, Mr. Anil said that RIL with huge reserves (over Rs. 30,000 crores) could give shareholders better benefit by giving bonus shares, quantum of which could be decided by the board on merit, than offering a buyback.

If buyback lowers the shares outstanding with the public and consequently increases the earnings per share (EPS), which probably benefited RIL more, the bonus issue would mean increased say for the existing shareholders as also the number of shares in the open market, Mr. Anil is believed to have said.

He also sought to remind that RIL could not buyback anything despite clearing a proposal in 2000 at a price of up to Rs. 303.

RIL had last issued a bonus share of 1:1 in 1997 following which the Founder Chairman Dhirubhai had promised to continue with the programme of bonus shares, sources said indicating that the family patriarch was amenable to such a route in five years.

However, RIL did not issue a bonus share in 2002, the year Dhirubhai died, and Mr. Anil sought to push the idea in the name of his father's legacy.

Even before the board had met, Mr. Anil opened front against Mr. Mukesh questioning the buyback proposal saying there was more than what met the eye.

However, RIL sought to allay fears about speculation by issuing a communication to the Bombay Stock Exchange on Tuesday stating that the buyback of shares would be from market and not from promoters.

— PTI

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