Mukesh raises stake in RIL to 54.9%

Converts preferential warrants into equity shares for Rs 16,842 crore.

Billionaire Mukesh Ambani increased his stake in Reliance Industries (RIL), India’s largest private sector company, after exercising an option to convert preferential warrants into equity shares at a time when a global credit crisis roiled stock markets across the world and also pushed the company’s stock lower by 38 per cent since January.

Ambani’s move to raise his stake in the company to 54.9 per cent from 44.8 per cent has cost him about Rs 16,842 crore. If the promoters raise their stake above 55 per cent, it would trigger an open offer. Ambani has limited his stake below 55 per cent for avoiding open offer, said sources.

RIL on Friday said in a statement that it has allotted 12 crore shares to various promoter group companies, upon exercise of the rights attached to warrants issued to the promoter group companies on April 12, 2007. The equity shares will be subject to lock in for 3 years from the date of allotment of the warrants.

After the share allotment, the paid-up equity capital of RIL increased to Rs 1,573.79 crore comprising of 157,37,87,556 equity shares of Rs 10 each fully paid up.

The move is significant as owing to poor market conditions, in recent months, many promoters have either postponed or cancelled their right to convert preferential warrants.

During the time of the allotment of preferential warrants in February 2007, Ambani had paid 10 per cent of the amount, or about Rs 1,684 crore, upfront. The balance (Rs 15,158 crore) was to be paid to convert the warrants into shares.

Conversion of these warrants into equity shares of Rs 10 face value was fixed at Rs1,402 per share – at a 12 per cent premium to the then average weekly price of the RIL stock.

The company had specified that 90 per cent of the value of shares would be paid during subscription to equity shares on exercise of rights attached to the warrants. It fixed an 18-month period for exercising the call.

The company’s scrip closed at Rs 1,760.95, down 7.67 per cent, on the Bombay Stock Exchange on Friday. The benchmark Sensex declined 529 points, or 4 per cent, to 12,526. Since January, RIL stock has fallen 39 per cent whereas the Sensex has fallen 38.25 per cent.