The Hindu : Business : Anil Dhirubhai to invest Rs.3800 cr. in REL and RCL

Online edition of India's National Newspaper
Wednesday, Jul 20, 2005

Business

Business

Anil Dhirubhai to invest Rs.3800 cr. in REL and RCL

Special Correspondent

Reliance Capital aiming to become a big player

MUMBAI: Anil Ambani would invest a total of Rs. 3,800 crore in Reliance Energy Ltd (REL) and Reliance Capital Ltd. (RCL), the two companies which have come under his fold as part of the settlement with his elder brother Mukesh Ambani.

Anil Dhirubhai Ambani Enterprises (ADAE) would invest Rs. 1,500 crore in the share capital of REL and Rs. 2,300 crore in RCL, Mr. Anil Ambani told separate extraordinary general meetings of the two companies for approval of preferential issues to ADAE on Tuesday.

"This investment in RCL will be made in accordance with the Securities and Exchange Board of India (SEBI) guidelines, at Rs. 228 per share, a 52-week high price at the time the decision was announced. This is, by far, the single largest investment by any professional entrepreneur in this country. This investment is a reflection of my personal conviction in the vast potential of the financial services sector, and the long-term growth prospects of Reliance Capital, a conviction amply shared by others", said Mr. Anil Ambani while addressing the extraordinary general meeting of Reliance Capital here.

The company's recent equity offer was oversubscribed 12 times by global investors and that too in a record time of four days, representing a commitment of over $1 billion (about Rs. 4,500 crore) against the offer of $85 million (about Rs. 370 crore). After the proposed equity infusion, the net worth of Reliance Capital will go up from Rs. 1,500 crore to Rs. 4,500 crore.

"Reliance Capital will become the third largest private sector company, after ICICI and HDFC, in the financial services sector, in terms of net worth.

At the average industry debt-equity ratio in financial services of 10:1, the company will have the capacity to borrow Rs. 45,000 crore. But even at half that ratio, Reliance Capital will have a borrowing power of Rs. 22,500 crore, creating a stronger financial platform for future growth and expansion.

Investors' commitment

The investment in REL will be made at a price of Rs. 573 per share. This constitutes a 90 per cent premium over the average weighted price of under Rs .300 per share paid by the Reliance group for acquiring shares in the company.

While addressing the extraordinary general meeting of REL, Mr. Ambani said, "The proposed investment is a reflection of my personal belief and conviction in the vast potential of India's power sector, and the long-term growth prospects of Reliance Energy. I look forward to join all of you as a proud shareholder of our company,'' Mr. Ambani added.

He said other institutional investors had committed Rs. 250 crore for the current equity offer. The new equity infusion would enhance the net worth of the company from Rs. 6,500 crore to over Rs. 8,200 crore and substantially raise the borrowing capacity.The Union Ministry of Environment and Forests has recently given the necessary environmental clearance for the 7,480 MW Dhirubhai Ambani Energy City project, which is to be commissioned in phases. This will be the world's largest gas-based power project. The RIL board has already re-confirmed the in-principle availability of gas for the project.

"The Reliance group is now undergoing a process of re-organisation. The RIL board has, in principle, approved this process. The four pillars of the ongoing restructuring, as I have advocated, are fairness, transparency and the need to unlock and enhance the value for all the RIL shareholders (2.3 million), especially the small investors who have always been the bedrock of Reliance's foundation,'' Mr. Ambani added.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section