The Hindu : Business : RIL price discovery session today

Online edition of India's National Newspaper
Wednesday, Jan 18, 2006

Business

Business

RIL price discovery session today

Reliance scrip carries the second highest weight in Sensex after Infosys

MUMBAI: Reliance Industries' name will go down in the history of Indian stock markets on Wednesday as the only company for which a special trading session will be held to discover the price of its shares following its demerger necessitated by a settlement between the Ambani siblings.

Shares of RIL, fancied by the investor community and which carries the second highest weight in the Bombay Stock Exchange Sensitive index, will command a new price after the company spins off four new entities as part of the ownership settlement in the Reliance group founded by the late Dhirubhi Ambani.

A day ahead of the historic session, RIL shares rose to Rs. 928 on the Bombay Stock Exchange, boosting investors' confidence. It had reached an all time high of Rs. 935.90 on January 4. The BSE Sensex on Tuesday witnessed a swing of 107 points following the RIL-led rally alternated by heavy profit taking by mutual funds, brokers said. The RIL scrip was in keen demand right from the commencement of trading

As per the de-merger scheme, 100 shares of RIL would split into equal number of RIL shares along with five shares of Reliance Capital Ventures, 7.5 shares of Reliance Energy Ventures, 100 shares of Reliance Communications and 100 shares of Global Fuel Management Ventures.

In such a scenario, the market capitalisation of RIL can undergo a change, depending on the price during the special session on January 18, being termed as "RIL Price Discovery Session.''

All the four new entities, being created as `special purpose vehicles,' to carry the holdings of RIL shareholders in the companies under the charge of younger brother Anil Ambani will be listed soon.

The change in the market capitalisation of RIL will result in the indices requiring adjustment in base market capitalisation, as two of the four new separate corporate entities arising from de-merger are not at present listed and traded and valuing the post de-merger price of RIL is not possible by the exchanges.

This special one-hour trading session will be held between 8 and 9 a.m. During this period, only RIL shares will be traded and no circuit filter will be applied.

The volume-weighted average price of RIL during this session will be used for adjustment to the base market capitalisation of the respective indices. No index will be calculated during the session and the normal market will commence at 9.55 a.m. for regular trading. The trades done for RIL during the special trading session will be settled along with the normal market trades of January 18.

Healthy operating margin

The Bombay High Court had cleared the company's petition for sanctioning the scheme of arrangement for the demerger on December 9 last year.

RIL is expected to continue to perform well even after the demerger as a fully-integrated petroleum-to-petrochemicals conglomerate. The company now enjoys a healthy operating margin. RIL can use its strong cash flows and low-debt exposure to finance further expansion, particularly into the retail sector. At present, the company's market capitalisation is around Rs. 1,21,667 crore while the valuations of the four new entities of the ADAE group's market cap are put at Rs. 25,000 crore to Rs. 30,000 crore with a price band of Rs. 200-250 for these companies. — PTI

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