RIL, RPL board to meet on March 2 to consider merger plans

The planned merger between Reliance Industries Ltd (RIL) and Reliance Petroleum (RPL) has led to speculation in the market about the swap ratio at which the shares will be exchanged post the merger.
According some analysts, the swap ratio is expected to be 17 RPL shares for every RIL share on the last closing price, while based on the book value the swap ratio is expected to be 24 RPL shares for each RIL shares.
However, some say if the merger is taking place between two listed companies they need to follow SEBI pricing norms for reaching a swap ratio. As per the norm, 30 days prior to the relevant date, two weeks average or 26 weeks average which ever is higher becomes the benchmark price for the purpose of merger.
But, if the companies insist on higher valuation than the prevailing norm of 26 weeks average or two weeks average, in such a case the pricing has to be justified to the committee in the stock exchanges. Also, any such higher independent valuation needs to have the vetting of shareholders during the EGM.
Analysts also believe the merger may be a good idea as it will enhance RIL’s position as an integrated global energy player, and also because markets ascribe higher valuation to integrated energy companies vis-à-vis standalone refineries.
“When Reliance wanted to raise funds for refining activities, it created RPL and raised funds for its greenfield project. Now that the project has come on stream may be integrating the same with the parent conglomerate is a good idea,” said VVLN Sastry, research head Firstcall India Equity.
“Also, the merger is not expected to impact the share price of Reliance Industries on Monday, but a price rise in RPL shares is expected with the given merger,” Sastry said.
Analyst also predict that in the long run the merger would of great value for RPL shareholders as the big investors chase highly weighted stocks. “From an investors’ point of view when we talk of investment we look at the investment horizons and based on that the merger is expected to raise the value of RPL stocks,” said a senior analyst with a local brokerage.