>Reliance Industries (ANGEL BROKING)

RELIANCE INDUSTRIES
EVENT UPDATE

RIL-RPL merger: Swap ratio - Win-win game for the companies....

In the Board meeting held today, RIL- RPL Boards have accepted the merger proposal. The Swap ratio has been fixed at 1 Share of RIL for 16 shares of RPL. RIL has also decided to extinguish the treasury shares created following merger of the companies. Appointed date of merger of RPL with RIL is April 1, 2008. Based on the recommended merger ratio, RIL will issue 6.92 crore new equity shares to the existing shareholders of RPL. This will result in 4.4% increase in RIL's equity base from Rs1,574cr to Rs1,643cr. Consequently, the effective promoter holding in RIL will reduce from 55.0% to 52.7% post merger. The merger is likely to create an entity operating two of the world's largest and most complex refineries owning 1.24 million barrels per day (mnbpd) of crude processing capacity, the largest refining capacity at any single location in the world. The merged entity would emerge as the world's 5th largest producer of Polypropylene.

* Synergies from the merger: RIL expects the merger to provide synergies in crude procurement and product placement. However, we believe synergies are likely to be lower as the companies would be sharing facilities. Nonetheless, RIL expects the merger to be Earnings accretive. The merger would do away the holding company discount for RPL. Other benefits such as strong Cash flow and Balance Sheet along with lower cost of capital for RIL also exist. However, RIL has clarified that it would not be eligible to benefit from the Depreciation tax shield of RPL.

* Merger - An Earnings Accretive move: We believe the RIL-RPL merger is likely to be Earnings accretive for RIL shareholders. FY2010 EPS is likely to be higher by 1.66% due to
the merger.

To see full report: RIL